Graded  Corporation 
Problems 


BY 

Samuel  F.  Racine 

Certified  Public  Accountant 


Graded  Corporation 
Problems 


BY 

Samuel  F.  Racine 

Certified  Public  Accountant 


COPYRIGHT  1914 

BY 

SAMUEL  F.  RACINE 


PUBLISHED   BY 

THE  WESTERN  INSTITUTE  OF  ACCOUNTANCY, 
COMMERCE   AND   FINANCE 

'idJARYBLp^,  \j  SEATTLE,  WASH. 

•   *  '■  •!  ''a  •'■♦  "i  I     •  . 


Accounting  Students'  Series 

ACCOUNTING  PRINCIPLES.  By  Samuel  F.  Racine,  C.  P.  A. 
$3.00.  A  text  written  expressly  for  the  advanced  students  of  one 
of  the  leading  schools  of  the  West.  It  is  the  one  book  on  account- 
ing principles  to  which  the  student  can  refer  and  find  an  answer 
to  any  of  the  baffling  questions  on  the  theory  of  accounts.  Every 
published  examination  paper  of  recent  years  was  carefully  studied 
in  an  effort  to  bring  all  of  their  salient  features  into  this  unusual 
book.  Depreciation,  Goodwill,  Reserves  and  Sinking  Funds  re- 
ceive the  careful  attention  they  so  justly  deserve. 

STUDENTS'  GUIDE  TO  THE  STUDY  OF  AUDITING.  By 
Samuel  F.  Racine,  C.  P.  A.  $1.00.  A  careful  analysis  of  the  lead- 
ing text  book  on  auditing  arranged  in  question  form  for  the  pur- 
pose of  facilitating  study.  Every  page  of  the  text  book  was 
carefully  analyzed  and  special  questions  were  prepared  to  bring 
out  each  important  point  mentioned  so  that  the  student  is  guided 
directly  to  the  particular  information  he  should  secure  from  each 
chapter  and,  by  endeavoring  to  answer  the  questions  after  com- 
pleting a  chapter,  can  readily  determine  the  result  of  his  effort. 
Instructors  and  students  who  are  using  this  book  find  it  invaluable, 

STUDENTS'  GUIDE  TO  THE  STUDY  OF  ACCOUNTING.  By 
Samuel  F.  Racine,  C.  P.  A.  $1.00.  A  book  similar  to  the  Guide 
to  the  Study  of  Auditing  but  containing  carefully  chosen  ques- 
tions on  a  number  of  the  leading  text  books  on  general  accounting 
and  cost  accounting.  It  also  contains  a  number  of  problems  and 
solutions  illustrating  the  subject  matter  of  the  text  books  used. 

GRADED  CORPORATION  PROBLEMS:  By  Samuel  F.  Racine, 
C.  P.  A.  $1.25.  A  series  of  problems  chosen  from  the  C.  P.  A. 
examination  questions,  classified  according  to  subject  and  care- 
fully graded. 


288834 


GRADED  CORPORATION  PROBLEMS 


CODE:  NABOB. 

On  paper  ruled  as  for  a  stock  ledger 
make  entry  of  the  following  stock  trans- 
actions of  William  Henderson,  closing 
the  account  as  of  October  31,  1904,  and 
carrying  down  the  balance : 

(a)  100  shares  (par  value  $100.00) 
originally  issued,  full  paid  at  par,  to  Wil- 
liam   Henderson    by    certificate    No.    5, 


August  16,  1904. 

(b)  William  Henderson  sells  50  shares 
of  the  original  100  to  Charles  Gibbons  at 
$130.00,  September  14,  1904,  receiving 
certificate  No.  37  for  shares  retained. 

(c)  October  28,  1904,  William  Hen- 
derson purchases  from  John  Hogan  25 
shares  at  $115.00  and  receives  certificate 
No.  78. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NAIL. 

Of  $300,000  authorized  capital  (com-  instalment  has  been  called  and  collected, 
mon  stock)  $260,000  has  been  subscribed.  The  second  instalment  has  been  called, 
$80,000  was  paid  in  cash  and  $100,000  in  but  has  not  yet  been  collected.  Make 
property.  The  remainder  is  to  paid  in  original  entries  covering  above  trans- 
cash  in  five  equal  instalments.    The  first  actions  and  prepare  ledger  accounts. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NATAL. 

A  corporation  organizes  under  the  laws 
of  Michigan  to  conduct  a  manufacturing 
business.  Authorized  capital,  $400,- 
000.00,  half  each  common  and  preferred 
stock ;  shares  $100.00.  Five  incorporators 
each  subscribe  for  ten  shares  of  common 
stock  at  face  value.  John  Smith  purchases 
from  three  manufacturing  companies 
their  complete  plants  for  $395,000.00  and 


transfers  said  plants  to  the  incorporated 
company  for  the  remaining  $395,000.00 
of  common  and  preferred  stock  and 
$150,000.00  of  first  mortgage  5%  bonds 
out  of  a  total  issue  of  bonds  of  $200,- 
000.00,  leaving  $50,000.00  of  bonds  in  the 
treasury. 

Make  opening  journal  entries  and  trial 
balance  showing  the  company's  condition 
after  the  transaction. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NATURAL. 

"A,"  "B"  and  "C"  organize  Company 
"D."  Capital  stock,  $100,000.00.  "A" 
subscribes  for  740  shares;  "B,"  250 
shares ;  "C,"  10  shares. 

"A"  is  credited  with  $25,000.00  for 
services  in  organizing  the  company,  and 
is  to  secure  an  additional  credit  of 
$3,000.00  per  month  as  salary. 

"B"  is  to  secure  a  credit  of  $1,000.00 
per  month  as  salary. 

"C"  receives  $1,000.00  for  services  in 
organizing  the  company. 

"A"  then  has  certificates  issued  to  "X" 


for  20  shares,  "Y,"  15  shares,  and  "Z," 
15  shares,  and  also  donates  30  shares  to 
the  company  for  working  capital. 

"M"  buys  the  treasury  stock  at  par, 
paying  cash. 

Certificates  are  issued  "C"  in  full.  "B" 
gets  a  certificate  for  1  month's  services, 
and  "M"  receives  his  certificate. 

Required  journal  entries  and  skeleton 
ledger  to  cover  the  above  transactions 
showing  in  addition  to  the  usual  accounts, 
accounts  with  certificates  issued  and  un- 
issued, at  par  value,  in  the  general  ledger. 


GRADED  CORPORATION  PROBLEMS 

CODE:  NAVE. 

On    May   31,    1905,   corporation   "A"  The  selling  price  to  corporation  "B"  is 

sells  its  assets  (except  cash)  to  corpora-  $100,000.00;  $50,000.00  being  payable  in 

tion  "B."    The  balance  sheet  of  corpora-  cash  and  $50,000.00  in  the  capital  stock 

tion  "A"  is  as  follows :  of  corporation  "B." 

assets:  On  completion  of  the  sale  to  corpora- 
Real    Estate,   Buildings.   Machinery  tion  "B,"  corporation  "A"  pays  its  bills 

and  Furniture  $  40,000.00  ,                   ^  ^            ,  ,         j-  j.  -u   ^        ^i. 

Merchandise  Inventory  15,000.00  ^nd    accounts    payable,    distributes    the 

Bills  and  Accounts  Rec 20,000.00  assets  then  remaining  to  its  stockholders, 

Cash  5,000.00  pro  rata  and  dissolves. 

<R  Rnnnnm  Prepare  journal  entries  for  corporation 

"A"  covering  the  above  transactions  and 

liabilities:  closing    out    corporation    "A's"    books. 

Capital  Stock-500  shares  of  $100....$  50,000.00  ^Iso  state  how  much  (a)  in  cash,  (b)  in 

Bills   &   Accounts   Payable 25,000.00  j.     i       £                  ,  •        «r>»         u     i.            r 

Undivided  Profits 5,000.00  stock  of  corporation     B     each  share  of 

corporation  "A"  is  entitled  to  in  the  final 

$  80,000.00  distribution. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NEAT. 


The  following  figures  are  taken  from  the  books  of  a  firm  as  at 
December  31,  1912: 

Accounts  Receivable   $27,850.00 

Merchandise  Inventory  9,750.00 

Furniture  and  Fixtures 2,250.00 

Plant  and  Machinery 20,000.00 

Investments — Schedule  I    24,000.00 

Investments — Schedule  II   17,500.00 

Accounts  Payable 48,000.00 

Bills  Payable  45,000.00 

On  January  1,  1913,  a  corporation  was  formed  to  take  over  the 
business  but  the  Investments  list  in  Schedule  II  were  retained  by  the 
partners. 

10,000  out  of  25,000  shares  of  Common  Stock  of  the  par  value  of 
$5.00  each  were  issued  to  the  vendors  as  fully  paid  and  5,000  shares 
were  issued  for  cash. 

9,000  out  of  25,000  shares  of  6%  Preferred  Stock  of  the  par  value 
of  $5.00  each  were  given  in  payment  of  the  Bills  Payable  of  $45,000. 

Prepare  statement  showing  the  position  of  the  firm's  accounts  upon 
the  formation  of  the  corporation,  the  opening  journal  entries  on  the 
books  of  the  new  company,  and  a  Balance  Sheet  for  the  company  after 
formation,  dealing  with  any  difference"  according  to  your  judgment. 


-^™- 


GRADED  CORPORATION  PROBLEMS 


CODE:  NECTAR. 

A  corporation  took  over  the  business 
of  an  individual  whose  books  showed  him 
to  be  worth  $125,000,  for  the  sum  of 
$200,000,  payable  $50,000  in  bonds,  $50,- 
000  in  preferred  stock,  $50,000  in  com- 
mon stock  and  the  remainder  in  cash. 
The  capital  of  the  company  was  $100,000 
preferred  stock  and  $100,000  common 
stock.  The  balance  of  the  stock  was  sub- 
scribed for  and  bonds  were  issued  for 
$100,000.  According  to  the  subscriptions 
the  stock  was  to  be  paid  in  as  follows: 
10%  on  application,  40%  in  30  days  after 
allotment    and    50%    in    three    months 


thereafter.  On  the  bonds  10%  was  to  be 
paid  on  application  and  the  balance  in  30 
days  after  allotment. 

Make  the  necessary  journal  entries  on 
the  books  of  the  company  to  cover  these 
transactions  in  accordance  with  the  state- 
ment following: 

Property  and  plant  $  75,000 

Raw    material    25,000 

Unfinished  orders  15,000 

Accounts  receivable  25,000 

Cash   10,000 

Accounts   payable   $  25,000 

Make  journal  entries  closing  the  books 
of  the  individual  vendor. 


i  ' 


GRADED  CORPORATION  PROBLEMS 


CODE:  NEOLITHIC. 

The  Patent  Specialty  Company  was 
organized  July  I.  1907,  with  a  capital  of 
$100,000,  to  manufacture  novelties.  The 
following  transactions  occurred : 

July  1,  1907,  one-half  of  the  capital 
.stock  was  subscribed  and  issued,  10% 
being  called  and  paid  on  that  date  in 
cash.  Legal  and  other  incorporation  ex- 
penses, amounting  to  $500,  were  paid. 

August  20,  1907,  patent,  covering 
novelty,  was  purchased  for  $50,000,  pay- 
able one-half  in  stock  and  one-half  in 
cash ;  the  stock  was  issued  and  delivered, 
$2,000  paid  in  cash  and  note  given  for 
balance,  due  in  one  month,  6%  interest. 
The  patent  was  subject  to  royalty  rights 
granted  to  the  novelty  company,  which 
terminated  at  date  of  purchase.  All  ac- 
rued  royalties  were  to  pass  with  patent 
and  no  royalty  rights  were  granted  by  the 
Patent  Specialty  Company. 


August  27,  1907,  the  village  Board  of 
Trade  donated  a  lot,  valued  at  $5,000,  in 
consideration  of  agreement  to  erect  and 
equip  a  plant  at  a  cost  of  not  less  than 
$25,000. 

September  13,  1907,  a  further  call  of 
70%  was  paid.  The  note  was  paid  at 
maturity. 

December  31,  1907,  the  following  facts 
existed : 

Payments  on  account  of  salaries,  in- 
terest, insurance,  etc.,  amounted  to 
$2,250,  with  $250  accrued;  contracts  for 
construction  and  equipment  amounting  to 
$35,000  had  been  given  which  were  75% 
completed  and  40%  paid ;  royalties 
amounting  to  $2,725  had  been  received 
and  $190.00  was  accrued. 

Prepare  journal  entries  to  cover  fore-, 
going,  and  statement  to  display  financial 
condition  at  December  31,  1907. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NESTLE. 

The  Domestic  Manufacturing  Company, 
organized  with  a  capital  stock  of  $5,000,- 
000,  one-half  preferred  stock  and  one-half 
common  stock,  sells  five  shares  of  the 
common  stock  at  par  for  cash.  It  issues 
to  John  Jones  $1,500,000  preferred  stock 
and  $1,000,000  common  stock  in  consid- 
eration of  the  assignment  by  him  of  cer- 
tain patents,  rights  and  contracts.  Later, 
Jones  agrees  to  surrender  for  valuable 
consideration  to  the  treasurer  of  the 
Domestic  Manufacturing  Company  $1,- 
000,000  common  stock  and  $500,000  pre- 
ferred stock.  Still  later,  Jones  agrees 
with  the  Domestic  Manufacturing  Com- 


pany to  surrender  $1,000,000  preferred 
stock  and  to  take  in  lieu  thereof  $1,000,- 
000  common  stock.  Jones  makes  a  fur- 
ther agreement  with  the  Domestic  Manu- 
facturing Company  to  deliver  to  it  all  the 
stock  in  the  Blank  Manufacturing  Com- 
pany, appraised  at  $350,000,  and  to  pay 
the  Domestic  Manufacturing  Company 
$150,000,  for  which  he  is  to  receive  $500,- 
000  of  preferred  stock  of  the  Domestic 
Manufacturing  Company. 

Illustrate  by  journal  entries  the  neces- 
sary accounts  to  be  opened  on  the  books 
of  the  Domestic  Manufacturing  Company 
to  show  each  step  taken  in  the  foregoing 
agreement. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NEXT. 

On  January  1,  The  Fairview  Real  Es- 
tate Association  was  incorporated,  the 
capital  subscribed  and  paid  in  being  $30,- 
000,  divided  into  30  shares.  The  associa- 
tion purchased  improved  property  for 
speculative  purposes,  paying  cash  $30,- 
000  and  giving  a  first  mortgage  for 
$60,000  at  6%. 

The  association  organized  anjd  incor- 
porated on  the  same  day  the  Fairview 
Club,  with  30  proprietary  members 
(being  the  stockholders  of  the  real  estate 
association),  and  30  associate  members, 
who  have  no  proprietary  interest,  but  en- 
joy all  privileges  without  incurring  any 
of  the  liabilities.  The  annual  dues  are 
$100  a  year,  paid  by  all  in  advance. 

The  association  leased  to  the  club  the 
property  aforesaid.  The  consideration  in 
lieu  of  rent  being  the  payment  by  the 
club  of  all  sums  for  taxes,  betterments, 
interest,  fixtures,  furniture,  etc. 

The  proprietary  members  are  assessed 
$300  each,  and  by  a  subsequent  resolution 


of  the  association  are  to  receive  credit 
therefor,  with  interest  at  6%.  Five  mem- 
bers fail  to  pay  the  assessment. 

The  association  having  executed  a  con- 
tract for  the  sale  of  the  property  for 
$110,000,  the  club  disbands  at  the  end  of 
the  year. 

The  club  expenditures  for  the  year 
were  as  follows :  Taxes,  $1,800 ;  interest 
on  mortgage,  $3,600;  repairs,  $1,000; 
improvements,  $3,000 ;  furniture  and 
fixtures,  $2,000;  general  expenses,  $500; 
help  (sundry  employees),  $1,600. 

There  were  house  charges  against  the 
members  of  $500,  which  were  subse- 
quently collected ;  and  there  were  payable 
book  debts  of  $4,000.  A  second  assess- 
ment of  $100  called  for  to  pay  oflF  the 
club  debts,  was  paid  by  the  proprietary 
members  of  the  association. 

Frame  journal  entries,  raise  and  close 
accounts  on  the  association  and  club 
books,  and  prepare  balance  sheet  and 
revenue  account  for  each. 


GRADED    CORPORATION    PROBLEMS 


CODE:  NIHIL. 

A  company  is  formed,  under  the  laws 
of  Mexico,  to  take  over  and  work  certain 
mining  properties.  At  the  end  of  one 
year  the  company  is  found  to  possess : 

Mining  lands  $  484,675.48 

Buildings  and  improvements 20,499.76 

Machinery    25,612.88 

Cash  on  hand  and  in  bank 24,612.50 

Silver   bullion    85,209.50 


Ore  in  dump  13,680.00 

Merchandise    5,420.80 

Fuel,  oil,  etc 679.20 

The  company  owes : 

On  open  account  $  3,890.12 

On   account   of  pay  rolls 400.00 

Note  due  in  six  months,  with  in- 
terest at  6%  25,000.00 

The  capital,   fully  paid,  is 500,000.00 

Set  up  balance  sheet. 


GRADED   CORPORATION    PROBLEMS 


CODE:  NIHILISM. 

As  the  greater  part  of  the  capital  in- 
vested in  the  undertaking  set  forth  in  the 
preceeding  question  is  furnished  by  citi- 
zens of  the  State  of  New  York,  a  cor- 
poration is  organized  under  the  laws  of 
that  state  to  acquire  a  majority  of  the 
capital  stock  of  the  Mexican  company 
and  thus  control  its  affairs.  The  capital 
is  fixed  at  $200,000,  all  of  which  is  sub- 
scribed for  and  paid  in  at  120.  An  issue 
of  $200,000  in  20-year  6%  gold  bonds  is 


authorized  and  sold  at  110.  The  new 
company  purchases  4,000  shares  of  the 
capital  stock  of  the  Mexican  company, 
par  value  $100  per  share,  Mexican  silver 
at  150.  At  the  end  of  one  year  a  divi- 
dend of  15%  is  received  on  these  shares. 
The  taxes  and  expenses  of  the  company 
are  $8,640. 

Set  up  a  profit  and  loss  statement  and 
balance  sheet,  assuming  the  value  of  the 
Mexican  dollar  to  be  50  cents,  gold. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NOBLY. 

"A,"  "B"  and  "C"  constitute  a  firm 
engaged  in  a  manufacturing  business, 
which  they  have  decided  to  change  into 
a  stock  company  with  a  capital  of  $100,- 
000,  equally  divided  into  common  and 
preferred  stock,  par  value  of  each  share 
$100.  Each  partner  is  to  take  stock  to 
the  amount  of  his  net  investment  in  the 
business  on  the  basis  of  75%  preferred 
and  25%  common  stock,  and  the  remain- 
ing shares  authorized  are  to  be  offered 
for  sale.    On  the  taking  over  of  the  busi- 


ness the  books  of  the  company  show  as- 
sets as  follows :  real  estate,  $25,000 ; 
machinery  and  tools,  $10,000 ;  merchan- 
dise, $15,000 ;  material  and  supplies, 
$8,000;  cash,  $5,000;  notes  receivable, 
$3,000 ;  accounts  receivable,  $9,000.  The 
liabilities  are :  notes  payable,  $10,000 ; 
accounts  payable,  $5,000;  "A,"  $25,000; 
"B,"  $20,000,  and  "C,"  $15,000. 

Formulate  the  necessary  entries  to 
close  the  books  of  the  firm  and  to  open 
the  corporation  ledger. 


GRADED  CORPORATION  PROBLEMS 

CODE :  NONCE.  3.  "X"  Company  pay  "A."  "B."  &  Co. 

"A."  and  "B."  were  partners  trading  $30,000.00  for  the  goodwill  of  the  busi- 

under  the  name  of  the  "A."  "B."  &  Co.  ness. 

June   30,    1908,   the    following   balances  4.  Payment   to   "A."   "B."   &   Co.,   is 

appear  on  their  ledger:  made    as    follows:      $50,000.00    in    first 

"A",  Capital  account  $  70,000.00  mortgage  bonds,  and  the  balance  in  capi- 

"B"    Capital  account  50,000.00  ^^j  ^^^^]^  ^f  ^he  "X"  Co. 

Real   Estate   22,000.00  ^      ,  ,^              .           n-  i^  ^  „  ar,  „   o    r^ 

Buildings    20,000.00  »•  ^^ter  paymg  off     A.       B.     &  Co. 

Machinery  &  Tools  44,000.00  the  remainder  of  the  capital  stock  is  sold 

Furniture  &  Fixtures  2,000.00  for  cash  to  sundry  persons. 

Accounts  Rec ^S'SSS  The  real  estate  which  was  retained  by 

Cash    7,000.00  «  a  "    "d  »»    p    <-       •     i          ,  .    r           «  a  » 

Material  &  Mdse 53,000.00  ^-        ^-     &  <-0-   ^s  bought   from     A. 

Accounts   Payable  35,000.00  "B."  &  Co.  by  "A."  for  $7,000.00  and  is 

Bills  Payable  48,000.00  to  be  charged  to  "A.'s"  capital  account. 

^'•J^  ^f qa-"iqaq":u""k •"""■     ^'^-^  After  the  completion  of  the  above  de- 

J""f  3<^;  1?H?   the  business  IS  m-  ^^^^^ed  transactions  "A."  and  ''B."  dis- 

corporated  as  the    X    Co.,  on  the  follow-  solve  partnership. 

'"l^Ca"pital  Stock,  $150,000.00.  •„  J°V- '  T^'lu'^L  ^V  '°.  ?'f  ^f'fp'lPl" 

o    «v''  n               *  1                4.U        4.-  i"g  entries  for  the  books  of    A.      B.    & 

2.     X    Company  takes  over  the  entire  r-^      /u\     „     o*  4.          ,.        ^^-         <■    ^i 

assets  and  liablities  of  "A."  "B."  &  Co.  Si"  r.iW    '    ^^^^ement     setting     forth 

at  the  book  fieiires  as  above   exceot  Ca)  partners     accounts    down    to    their 

real  estate  of  the  book  value  oi  $5,000  00,  ^"^^  '^°^^"?;  beginning  with  the  balances 

which  is  retained  by  "A."  "B."  &  Co.  f^"  ^^  '^^  ,^°°^%T  ^1!"^  ??'  ^^^^' 

(b)   the  accounts  receivable,  which  are  ^'^  °P^"^"^  ^"*"^^  °^  '^^    ^    ^o. 
taken  over  at  $48,000.00,  and    (c)    the 
capital  accounts  of  the  partners. 


GRADED    CORPORATION    PROBLEMS 


CODE:  NORTHING. 

Brown  and  Jones  have  dry  goods 
stores  near  each  other.  They  decide  that 
by  amalgamating  their  businesses  and 
forming  a  joint  stock  company  they  can 
do  a  larger  and  more  profitable  business 
at  less  expense.  Both  have  kept  their 
books  by  single  entry.  You  are  called  in 
to  give  the  necessary  statements  to  en- 
able them  to  ascertain  how  they  stand  and 
to  open  the  books  of  the  Brown-Jones 
Company,  Limited.  You  find  the  follow- 
ing accounts  in  the  ledgers,  viz. : 

BROWN'S  LEDGER 

BALANCES   AS   AT  AUGUST   1,   1909. 

Cash  on  hand  $         250.00    $ 

Bank   Balance   5,400.00 

Cash   Sales  10,000.00 

Book  debts  25,000.00 

Bills  receivable  3,000.00 

Store  and  land  30,000.00 

Fixtures  2,000.00 

Wages  and  expenses 4,000.00 

Accounts  payable  6,000.00 

Bills   payable   2,550.00 

Brown's   drawings   10,000.00 

Freight,  duty  and  cart- 
age     8,000.00 

Inventory  of  goods 8,700.00 

Unexpired    insurance ..  200.00 


JONES'   LEDGER 

BALANCES    AS    AT    AUGUST    1,    1909. 

Cash  on  hand  $       100.00    $ 

Bank    balance    3,500.00 

Cash    sales    12,000.00 

Stores  and  land  25,000.00 

Fixtures    1,500.00 

Wages    2,000.00 

Jones'  personal  account      6,000.00 

Expenses    1,500.00 

Book    debts    15,000.00 

Bills  receivable  1,000.00 

Freight,  duty  and  cart- 
age        5,000.00 

Accounts  payable  5,000.00 

Bills   payable    3,000.00 

Inventory  of  goods 5,800.00 

Unexpired  insurance 100.00 

The  capital  of  the  company  is  to  be 
$150,000.00,  in  shares  of  $100.00  each,  of 
which  Brown  is  to  take  $70,000.00  and 
Jones  $50,000.00.  If  the  capital  invested 
in  the  business  of  either  exceeds  these 
sums,  they  are  to  receive  the  surplus 
in  cash,  but  if  it  is  less,  they  are  to 
pay  in  the  difference  in  cash.  The  bal- 
ance of  the  stock  is  subscribed  and  paid 
for  in  cash. 

Make  necessary  changes  in  Brown's 
and  Jones'  ledger  balances  to  show  stand- 
ing of  firms  and  capital  invested,  and  give 
trial  balance  from  company's  ledger  after 
opening  entries  have  been  made. 


GRADED  CORPORATION  PROBLEMS 

CODE:  NOTE.  "A"  and  "B"  arrange  with  "C,"  "D" 
"A"  and  "B"  are  partners  and  share  and  "E"  to  form  a  corporation  with  a 
profits  in  proportion  to  their  capital  in-  capital  stock  of  $15,000.00.  The  cor- 
vested.  "C,"  "D"  and  "E"  are  partners,  poration  to  assume  all  assets  and  liabil- 
having  equal  interest  in  the  business.  A  ities  of  both  partnerships.  Each  partner- 
balance  sheet  from  the  books  of  "A"  and  ship  agrees  that  a  reserve  of  10%  against 
"B"  is  as  follows :  Accounts  Receivable  shall  be  created  and 
.    ,/ssETs:  charged  against  their  individual  partner- 

Cas'hTBank            ^  fS  '^^P  ^^^^^^^^  P"^''  ^°  ^^^  consolidation. 

Merchandise  as' "per'Tnventory.T.""!'    2!500"00  The  entire  capital  stock  is  to  be  allotted 

to  ''A,"  "B,"  "C,"  "D"  and  "E,"  in  pro- 

$  6,000.00  portion  to  their  partnership  holdings. 

liabilities:  "^^^  organization  expense  paid  by  the 

Accounts   Payable  $  1,200.00  new  company  was  $200.00. 

"A's"   Investment   1,500.00  Make  a  balance  sheet  for  the  new  com- 

BHh    ParaSr"*  ^S  Pany,  and  give  each  of  the  aforesaid  part- 
Undivided  Profits  800'00  "^^s  ^is  allotment  of  shares. 


$  6,000.00 

"C,"  "D"  and  "E"  kept  no  books,  but  have  the 
following  assets  and  liabilities : 
ASSETS : 

Cash  in  Bank  $     800.00 

Accounts  Receivable  3,000.00 

Merchandise   as   per   inventory 3,000.00 

Real    Estate— Warehouse    1,200.00 

$  8,000.00 

LIABILITIES  : 

Mortgage  on  Real  Estate $     500.00 

Accounts  Payable  300.00 

$     800.00 


GRADED  CORPORATION  PROBLEMS 


CODE:  NOTICE. 

Charles  and  Robert  Wilson  are  co- 
partners in  a  manufacturing  business, 
trading  under  the  firm  name  of  Wilson 
Bros.  Following  is  a  statement  of  the 
firm's  financial  condition  Dec.  31,  1900: 

ASSETS  : 

Real  Estate  and  Buildings _ $  165,000.00 

Machinery  and  Fix 39,000.00 

Horses,  Trucks  and  Harness 4,500.00 

Patents    1,500.00 

Stocks   and   Materials   20,000.00 

Notes  and  Loans  Rec 5,000.00 

Accounts    Receivable   15,000.00 


$  250,000.00 


LIABILITIES  : 

Notes  Payable  $      4,000.00 

2,000.00    $      6,000.00 


Accounts  Payable  $ 

10,000.00 

10,000.00 

10,000.00 

4,000.00 

34,000.00 

Chas.  Wilson,  Capital.... 
Robt.  Wilson,  Capital.... 

150,000.00 
60,000.00 

$  250,000.00 


A  joint  stock  company  under  the  cor- 
porate title  of  Wilson  &  Wilson,  Incor- 
porated, is  organized  with  a  capital  of 
$300,000,  of  which  $60,000  is  8%  cumu- 


lative preferred  stock  and  $240,000  is 
common  stock  (both  $100  par  value),  to 
acquire  and  conduct  the  business  of  Wil- 
son Bros.  Charles  and  Robert  Wilson 
and  Henry  Miller  each  subscribe  for 
$10,000  of  common  stock.  The  company 
votes  to  acquire  the  interest  of  Charles 
and  Robert  Wilson  in  the  business,  real 
estate,  plant,  outstanding  accounts,  etc., 
of  Wilson  Bros.,  and  to  assume  the  firm's 
indebtedness  of  $40,000,  in  consideration 
of  the  sum  of  $210,000,  and  to  pay  there- 
for 2,100  shares  of  common  stock  of  the 
corporation,  1,500  shares  to  be  issued  in 
the  name  of  Charles  Wilson  and  600 
shares  in  the  name  of  Robert  Wilson. 
The  company  votes  to  place  a  mortgage 
on  its  real  estate  and  plant  for  $50,000 
to  secure  an  issue  of  $50,000  first  mort- 
gage 5%  gold  bonds  of  the  denomina- 
tion of  $1,000  each.  The  creditors  sub- 
scribe for  preferred  stock  to  the  amount 
of  50%  of  the  amounts  due  them  and 
take  bonds  at  par  for  the  remainder. 

Make  all  entries  for  the  foregoing 
transactions  in  the  order  of  their  occur- 
rence, giving  details  to  be  found  in  ledg- 
ers and  all  subsidiary  books  of  account 
and  record. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NOVICE. 

Messrs.  Sharp  and  Flat,  partners,  en- 
gage in  manufacturing,  decide  to  form  a 
business  corporation  under  the  laws  of 
New  York,  under  the  name  of  The  Sharp 
&  Flat  Manufacturing  Company,  having 
an  authorized  capital  of  $100,000.  The 
corporation,  in  consideration  of  the  en- 
tire issue  of  capital  stock,  purchased  all 
of  the  assets  and  assumed  all  of  the  Ha- 
bilities  of  the  partnership  as  shown  by 
the  following  balance  sheet  dated  May 
31,  1900.  Sharp  &  Flat  take  all  the 
stock  except  five  shares,  par  value,  $100 
each,  issued  to  incorporators  for  cash 
subscriptions. 

BALANCE  SHEET— MAY  31,  1900. 

ASSETS : 

Plant  and  machinery $  35,000.00 

Stock  on  hand  per  inventory 20,525.00 

Accounts  receivable  22,750.00 

Bills  receivable 1,500.00 

Cash  ; 5,225.00 

$  85,000.00 

LIABILITIES  : 

Sharp's  capital  $  42,500.00 

Flat's  capital  36,300.00 

Accounts  payable 5,250.00 

Bills  payable  700.00 

Wages  due  and  unpaid  250.00 

$  85,000.00 

During  the  first  year  of  the  corpora- 
tion's existence,  the  books  were  kept  in 
the  same  manner  as  during  the  partner- 
ship. Soon  after  the  end  of  the  first  fis- 
cal year,  however,  a  certified  public  ac- 
countant was  presented  with  the  follow- 
ing trial  balance  showing  the  condition 
of  the  books,  May  31,  1901,  and  was  re- 
quested to  open  a  new  set  of  books  for 


the  corporation,  covering  the  operations 

of  the  business  during  the  past  year,  and 

to  prepare  therefrom  an  income  and  prof- 
it and  loss  account  and  a  balance  sheet : 
TRIAL  BALANCE— MAY  31,  1901. 

Sharp's  capital $  $    42,500.00 

Flat's  capital  36,300.00 

Plant  and  machinery..  37,500.00 

Stock    on    hand,    per 
ventory,     May     31, 

1900  20,525.00 

Sales  131,405.00 

Purchases :      Material 

and  supplies  48,000.00 

Labor   34,500.00 

Office  Salaries  7,000.00 

Traveling  expenses 2,400.00 

Interest  600.00 

Stationery  and  print- 
ing    175.00 

Rent  and  taxes 4,200.00 

Discounts  and  allow- 
ances    2,250.00 

Fuel 4,600.00 

Insurance   175.00 

Freight,  inward 1,750.00 

Commission  6,375.00 

Advertising  500.00 

Bills  receivable 6,115.00 

Bills  payable  1,100.00 

Accounts  receivable....  36,115.00 

Accounts  payable 7,850.00 

Cash   6,375.00 

$  219,155.00    $  219,155.00 

Draft  the  opening  journal  entries  nec- 
essary to  give  effect  to  the  above,  pre- 
pare an  income  and  profit  and  loss  ac- 
count and  a  balance  sheet  as  at  May  31, 
1901. 

Write  oflF  (a)  depreciation  5%  on 
plant  and  machinery,  (b)  unexpired  in- 
surance $75.00,  (c)  bad  debts  $325.00. 

Inventory,  stock  on  hand  May  31, 
1901,  $19,605.00. 


GRADED  CORPORATION  PROBLEMS 


CODE:  NUMB. 

"^  Senior  partner  "A"  desires  to  retire 
from  active  business  life.  He  has  con- 
fidence in  the  abiHty  and  integrity  of  his 
partner  "B"  and  both  have  a  Hke  regard 
for  their  sales  manager  "C"  and  their 
works  manager  *'D"  who  have  accumu- 
lated considerable  means.  In  this  situa- 
tion "B"  proposes  to  organize  and  to 
continue  the  business  as  a  corporation, 
under  his  executive  management,  and  to 
bring  in  sufficient  capital  from  "C"  and 
"D"  in  equal  parts  to  pay  off  the  prin- 
cipal of  a  real  estate  mortgage  falling 
due  at  the  end  of  the  year,  and  sufficient 
capital  from  "E",  who  is  not  connected 
with  the  business,  to  pay  oflf  the  prin- 
cipal of  the  firm's  notes  payable.  It  is 
contemplated  that  "E"  shall  be  made  the 
treasurer  of  the  corporation  and  that  the 
five  parties  shall  be  the  incorporators 
and  constitute  the  first  board  of  direc- 
tors. 

In  the  discussion  between  "A"  and  "B" 
it  is  agreed  that  the  net  worth  of  the 
business,  exclusive  of  the  goodwill  which 
has  never  been  represented  on  the  books, 
shall  be  converted  into  preferred  stock  of 
the  corporation  and  that  the  goodwill 
shall  be  valued  at  one-half  the  net  worth 
and  be  converted  into  common  stock ; 
also  that  the  cash  capital  contributed  by 
"C",  "D"  and  "E"  shall  be  paid  to  the 
firm  and  used  by  it  for  the  purposes  pro- 
posed by  "B"  and  converted  into  pre- 
ferred stock  for  account  of  the  three  par- 
ties respectively.  Thereupon  "A"  pro- 
posed and  agrees  to  surrender  one-fourth 
of  his  share  of  the  common  stock  on  the 
condition  that  it  shall  be  distributed  as 
follows:  two  parts  to  "C",  two  parts  to 
"D"  and  one  part  to  "E". 

These  matters  are  all  covered  by  writ- 
ten agreement  of  the  five  parties,  in 
which  agreement  it  is  provided  that  "A" 
and  "B"  shall  convey  to  the  corporation 


all  the  property,  business  and  goodwill  of 
their  co-partnership,  and  that  all  the 
transactions  and  stock  distributions  pro- 
vided for  shall  be  carried  through  and  be 
closed  out  in  the  books  of  the  co-part- 
nership, including  the  sum  of  $5,000 
which  shall  be  advanced  to  enable  the 
incorporators  to  pay  fully  their  subscrip- 
tions for  10  shares  each  of  the  common 
stock  of  the  corporation. 

A  certified  public  accountant  is  engag- 
ed to  make  an  examination  of  the  books 
and  accounts  up  to  the  close  of  the  year 
just  approaching;  to  procure  appraise- 
ments of  the  property,  and  to  close  the 
books  after  providing  therein  for  his 
compensation. 

On  the  completion  of  his  work  the 
books  show  the  following  condition  : 

ASSETS ; 

Land  '. $  50,000.00 

Buildings  200,000.00 

Machinery,  etc 100,000.00 

Finished  product,  product  in  process, 

materials  and  supplies 150,000.00 

Notes  receivable  100,000.00 

Accounts  receivable 100,000.00 

Cash  100.000.00 

$  800,000.00 

LIABILITIES  AND  CAPITAL 

Real  estate  mortgage  $  100,000.00 

Accrued    interest     on     real    estate 

mortgage  2,500.00 

Notes  payable  on  demand 50,000.00 

Accrued  interest  on  notes  payable....  1,000.00 

Accounts  payable 25,000.00 

Accrued  taxes  6,500.00 

Reserve  provision  for  uncollectible 

accounts    15,000.00 

"A's"  capital  400,000.00 

"B's"  capital  200,000.00 

$  800,000.00 

Prepare \eash- book  and  journal  entries 
to  be  placed  on  the  books  of  the  co-part- 
nership to  represent  properly  thereon  the 
carrying  out  of  all  the  matters  provided 
for  in  the  agreement  of  the  five  parties 
and  to  close  the  books. 


GRADED  CORPORATION  PROBLEMS 

CODE:   OAK.  Capital  stock $    _^_ 

rru     T^-  u     A  17  •  ^  13  •   .        Plant  ....: 30,000.00 

The  Richardson  Engraving  and  Print-  ^^^^^  ^^  ^and,  June 

ing   Co.,   a   corporation   had  an   author-         1st,  1908 8,750.00 

,          -^1^1       £  cMrn  AAA              J    u  Accounts  receivable....      20,640.00 

ized  capital  stock  of  $50,000  owned  by  Reserve  for  bad  debts 

Wm.    Richardson,   $10,000 ;    Silas   John-      Accounts  payable 

CM  c  AAA          J    T-u               A    4.         <^oK  Insurancc  adjustment, 

son,  $15,000,  and    Ihomas  Acton,  $25,-  ^^^j^                                  3  900  00 

000.  Engraving  

The  plant  was  destroyed  by  fire  Sept.     Printing 

23,   1908.      All   the   books   and    records  ^"^'ted   .!'.:...".°.'....     ." 

were    saved    except    the   sales    records.  Merchandise    pur- 

which  were  not  written  up  for  Septem-        chases  57,800.00 

ber.    The  insurance  companies  paid  $28,-     Wages  ^'^fSS 

000  on  the  plant  and  $7,000  on  the  stock,     ^^^^^^^^ 5 75000 

which  was  distributed  to  the  stockhold-  Profit  and  loss,  sur- 

ers  as   received   in    proportion    to  their        plus  

holdings.    Cash  was  received  from  Sep-     Wm.  Richardson 7,000.00 

tember  sales  amounting  to  $13,500.     On     |^^s^  "^Acton" 17  50000 

Sept.  30th  the  trial  balance  disclosed  the  '  "" 

following  conditions:  $  293,820.00    $  293,820.00 


$    50,000.00 


1,250.00 
12,590.00 
28,000.00 

77,600.00 
99,350.00 

24,175.00 


855.00 


The  accounts  receivable  realized  $18,- 
320  and  the  liquidation  expenses  were 
$1,850.  The  stockholders  turned  in  their 
stock  for  cancellation  and  received  their 


proportionate  amount  of  cash.  Prepare 
journal  entries  closing  the  books  of  the 
corporation  and  a  profit  and  loss  ac- 
count. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OAR. 

Assuming  a  scheme  was  on  foot  for 
the  consoHdation  of  six  competitive  man- 
ufacturing companies  engaged  in  the 
same  Hne  of  business,  and  that  you  were 
invited  to  formulate  a  scheme  for  the 
valuation  of  the  goodwill  and  assets  of 
the  respective  companies  that  would  be 


fair  and  equitable  to  all  parties,  out- 
line generally  the  plan  you  would  recom- 
mend, dealing  specifically  and  separately 
with — (a)  goodwill;  (b)  plant  and  equip- 
ment; (c)  inventories,  of  raw  material, 
work  in  process  and  finished  stock,  re- 
spectively, and  (d)  accounts  and  bills  re- 
ceivable. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OASIS. 

A  corporation  is  organized  to  conduct 
a  manufacturing  business  with  a  declar- 
ed capital  of  $2,000,000,  divided  into  20,- 
000  shares  of  the  par  value  of  $100,  of 
which  15,000  shares  or  $1,500,000  shall 
be  preferred  stock  and  5,000  shares  or 
$500,000,  common  stock.  The  corpora- 
tion proposes  to  issue  $500,000  in  consol- 
idated mortgage  bonds  to  be  used  to- 
ward the  purchase  of  sundry  properties. 
The  amount  of  capital  with  which  the 
corporation  begins  business  is  $50,000, 
being  the  proceeds  of  subscriptions  for 
500  shares  preferred  stock. 

To  carry  out  the  purposes  of  said  cor- 
poration, the   real  estate,  water  power, 


machinery,  goodwill,  etc.,  of  certain  ex- 
isting corporations  have  been  purchased 
at  an  appraised  valuation  of  $2,000,000, 
viz.,  Diamond  Mfg.  Co.,  $200,000;  Eu-. 
reka  Mfg.  Co.,  $300,000 ;  Champion  Mfg. 
Co.,  $500,000;  American  Mfg.  Co., 
$600,000 ;  Aetna  Mfg.  Co.,  $400,000 ;  and 
in  payment  full  paid  stock  and  bonds 
have  been  issued  at  par  on  a  basis  of 
60%  in  preferred  stock,  20%  in  common 
stock  and  20%  in  bonds. 

Material  and  supplies  are  to  be  paid 
for  in  cash  when  their  value  is  deter- 
mined. 

Formulate  the  entry  necessary  to  open 
the  books  of  the  new  corporation. 


' 

' 

.,.,...„...>,„ 

, 

^    ,  ^ 

^ 

_„.._!, ^  ..„....' 

^ 

GRADED  CORPORATION  PROBLEMS 


CODE:  OBLONG. 

The  Great  Northern  Manufacturing 
Company  was  incorporated  under  the 
laws  of  the  state  of  New  Jersey,  Feb- 
ruary 1,  1899,  with  a  capital  stock  of 
$10,000,000,  consisting  of  $4,500,000 
(45,000  shares  of  $100  each)  preferred 
7%  non-cumulative  stock,  and  $5,500,000 
(55,000  shares  of  $100  each)  of  common 
stock.  On  the  same  date  $2,000  of  the 
common  stock  was  subscribed  for  at  par 
as  follows : 

By  John  Smith,  2  shares $     200 

Henry  Brown,  4  shares 400 

John  Doe,  4  shares 400 

Henry  Rodman,  3  shares 300 

Wm.  Rodman,  7  shares 700 

Total    ■■$  2,000 

On  February  4,  1899,  these  subscribers 
paid  in  to  the  company  the  amount  of 
their  subscription,  and  the  stock  was  is- 
sued to  them.  February  15th  the  balance 
of  the  authorized  capital  stock  of  the 
company  both  preferred  and  common, 
was  issued  by  resolution  of  the  board  of 
directors,  to  John  M.  Scott,  for  and  in 
consideration  of  $750,000  in  cash  and  12 
manufacturing  plants.  An  inventory  of 
the  property  purchased,  made  by  author- 


ized representatives  of  the  company,  re- 
sulted in  the  following  appraised  valua- 
tions of  the  various  plants  and  the  stock 
on  hand : 


Fac 

-        Mat. 

Mer- 

Ma- 

lor- 

and 

chan- 

Real 

Build- 

chin- 

ies 

Sup. 

dise 

Estate 

ings 

ery 

A.... 

$     430,000 

$  95,000 

$    195,000 

$  20,000 

$  98,000 

B... 

211,000 

44,000 

130,000 

10,000 

84,000 

C... 

495,000 

38,500 

475,000 

11,000 

62,000 

U... 

304,000 

15,000 

924,000 

13,000 

48,000 

K.... 

171,000 

32,750 

184,000 

14,500 

89,000 

F.... 

86,500 

81,000 

60,000 

17,750 

26,000 

G.... 

47.250 

44,000 

30,000 

32,500 

34,000 

H... 

98,000 

35,750 

20,000 

14,600 

62,000 

1 

101,250 

11,000 

10,000 

17,200 

11,000 

J 

37,000 

13,000 

11,000 

19,200 

35,000 

K... 

346,000 

49,000 

14,000 

75,000 

71,000 

L... 

121,000 

67,000 

37,000 

34,750 

44,000 

$2,448,000 

$526,000 

$2,090,000 

$279,500 

$664,000 

Open  the  accounts  of  the  company  so 
that  the  result  of  the  operation  of  each 
factory  will  be  known  at  the  end  of  the 
company's  fiscal  year.  The  books  of  the 
company  are  not  to  show  the  appraised 
valuation  placed  on  the  real  estate,  build- 
ings, machinery,  etc.,  by  factories,  but  in 
one  amount  only ;  and  it  is  desired  that 
the  account  include  any  expenditures  in- 
curred by  the  company  for  goodwill,  etc. 

Make  opening  entries  in  cash  book, 
journal  and  ledger,  covering  in  full  the 
above  transactions. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OBTRUDE. 

Two  manufacturers  producing  the 
same  class  of  wares  and  operating  in  ad- 
jacent territories  decide  to  consolidate  by 
incorporating  a  company  to  acquire  the 
assets  and  business  of  both  concerns, 
with  an  authorized  capital  of  $500,000, 
half  common  and  half  preferred  stock. 
The  company  so  formed  purchases  the 
plant  and  other  assets  of  the  two  vendors, 
subject  to  payment  of  $10,000,  giving 
therefor  its  capital  stock  to  the  full 
amount  authorized. 

In  order  to  provide  a  working  capital, 
the  vendors  donate  one-fifth  of  both  com- 


mon and  preferred  stock  to  the  com- 
pany's treasury.  The  company  sells  four- 
fifths  of  the  preferred  stock  so  donated, 
at  90%,  giving  therewith  a  bonus  of  50% 
of  common  stock.  For  the  purpose  of 
making  needed  betterments  and  exten- 
sions to  the  plant  the  company  issues  20 
>ear  6%  gold  bonds  to  the  amount  of 
SI 00,000,  secured  by  a  mortgage  on  its 
real  estate,  which  bonds  are  sold  to  bank- 
ers at  par,  with  a  bonus  of  10%  pre- 
ferred stock  and  30%  common  stock. 

Frame  journal  entries  of  the  above 
transactions,  showing  the  assets  and  lia- 
bilities consequent  thereon. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OCCUPY. 

Three  manufacturers  each  having  an 
independent  business  and  wishing  to  ef- 
fect a  consolidation  of  their  respective 
interests,  organize  the  United  States 
Manufacturing  Corporation,  with  an  au- 
thorized capital  stock  of  $1,500,000,  con- 
sisting of  7,500  shares  of  preferred  stock 
and  7,500  shares  of  common  stock  of 
$100.00  each.  They  sell  to  the  new  com- 
pany all  of  their  real  estate,  buildings, 
machinery,  tools,  fixtures,  merchandise 
and  supplies  in  consideration  of  $1,500,- 
000  and  agree  to  accept  in  payment 
$750,000  of  preferred  and  $750,000  of 
common  stock  of  the  United  States  Man- 
ufacturing Corporation  at  par.  The  ven- 
dors donate  to  the  treasury  of  the  com- 


pany $150,000  of  preferred  stock  and 
$150,000  of  common  stock  to  provide  for 
working  capital.  The  company  sells 
$100,000  of  its  preferred  stock  in  the 
treasury  for  80%  cash,  giving  a  bonus,  to 
the  purchaser,  of  20%  common  stock. 

For  the  purpose  of  raising  additional 
funds  for  improvements  and  additions  to 
plant,  the  company  mortgages  its  real 
estate  and  buildings,  as  security  for  an 
issue  of  bonds  amounting  to  $250,000. 
These  bonds  the  company  sells  to  bank- 
ers at  90%,  giving  as  a  bonus  10%  pre- 
ferred stock  and  20%  of  common  stock. 

Draft  entries  to  express  correctly  the 
above  transactions  on  the  books  of  the 
corporation,  and  prepare  a  statement  of 
assets  and  liabilities  of  the  company. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OCTAVO. 

Several  manufacturers  consolidate 
their  interests  and  organize  the  ConsoH- 
dated  Manufacturing  Company  with  an 
authorized  capital  stock  of  $1,000,000,  di- 
vided into  5,000  shares  of  common  stock 
and  5,000  shares  of  preferred  stock  at 
$100.00  each,  par  value. 

The  manufacturers  sell  to  the  company 
all  of  their  assets  subject  to  floating  debts 
of  $115,000,  divided  into  notes  payable 
$65,000,  and  accounts  payable  $50,000, 
for  the  sum  of  $1,000,000  payable  $1,000 
in  cash,  $499,000  in  common  stock  and 
$500,000  in  preferred  stock.  The  com- 
pany agrees  to  pay  the  debts  of  $115,000. 
The  active  assets  acquired  are  inven- 
toried by  the  Consolidated  Manufactur- 
ing company  as  follows:  real  estate, 
$175,000 ;  machinery,  $200,000,  and  mer- 
chandise, $155,000. 

The  patents  and  goodwill  were  inven- 


toried at  a  sum  equal  to  the  difference  be- 
tween the  net  cost  to  the  company  of  the 
assets  acquired  and  the  above  valuation 
of  the  active  assets. 

The  company  received  $1,000  cash  for 
10  shares  of  common  stock  and  for  the 
purpose  of  providing  funds  for  working 
capital  authorized  an  issue  of  bonds 
amounting  to  $300,000  of  which  $300,- 
000  were  immediately  sold  as  follows : 
$100,000  for  cash  at  80%  and  $100,000 
for  cash  at  par  with  a  bonus  of  common 
stock  amounting  to  $100,000. 

For  the  purpose  of  providing  common 
stock  to  be  given  as  a  bonus,  the  man- 
ufacturers donated  $200,000  of  common 
stock  to  the  treasury  of  the  company. 

Prepare  the  journal  and  cash  entries 
for  the  company,  covering  all  of  the 
above  transactions,  and  prepare  a  bal- 
ance sheet  of  the  company. 


GRADED    CORPORATION    PROBLEMS 


CODE:   OFFICIAL. 

A  proposition  has  been  made  for  the 
taking  over  of  three  corporations  char- 
tered by  the  State  of  Pennsylvania  by  a 
fourth  corporation  to  be  chartered  by 
the  same  state. 

The  following  statement  of  affairs  has 
been  submitted  by  the  three  corporations 
proposed  to  be  absorbed,  and  found  to 
be  correct : 

CORPORATION   NO.    1. 

Capital  stock  (par  value  of  shares, 

$25.00)    $  1,000,000.00 

Treasury  stock 100,000.00 

Bonded  indebtedness 500,000.00 

Treasury  bonds 50,000.00 

Accounts  payable  80,000.00 

Bills  payable  50,000.00 

Cash  50.000.00 

Accounts  receivable 180,000.00 

Bills  receivable ■.  42,000.00 

Supplies  18,000.00 

Plant  and  franchise 1,250,000.00 

CORPORATION    NO.   2. 

Capital  stock  (par  value  of  shares, 

$50.00)    $  1,000.000.00 

Bonded  indebtedness  500,000.00 

Accounts  payable  120,000.00 

Bills  payable  10,000.00 

Cash  53,000.00 

Accounts  receivable  220,000.00 

Bills  receivable  80,000.00 

Supplies 52,000.00 

Plant  and  franchises  1,275,000.00 

CORPORATION   NO.  3. 

Capital  stock  (par  value  of  shares, 
$25.00)    $         1,000.00 


The  proposition  made  to  the  three  cor- 
porations is  as  follows :  Each  corpora- 
tion shall  pay  its  own  debts,  and  distrib- 
ute among  its  own  stockholders  whatever 
amount  shall  appear  to  the  credit  of 
profit  and  loss  in  closing  their  books, 
treating  the  statements  rendered  as  be- 
ing correct  as  to  values. 

The  remaining  assets  are  to  be  turned 
over  to  the  promoters  o"f  the  new  cor- 
poration on  the  following  terms : 

The  capital  stock  of  corporations  Nos. 
1  and  2  at  20%  premium  in  cash,  and 
$100,000.00  in  cash  be  paid  for  the  cap- 
ital stock  of  corporation  No.  3. 

The  bonds  of  the  two  corporations  will 
be  purchased  at  a  premium  of  5%. 

The  proposition  was  accepted. 

Give  closing  entries  of  the  books  of  the 
old  corporations. 

Organize  the  new  corporation  with  a 
capital  of  $1,000.00,  and  increase  to  such 
an  amount  as  you  may  deem  necessary, 
carrying  the  expenses  of  incorporation 
through  your  cash  (estimated  at  $100), 
including  $5,000.00  counsel  fees. 

Provide  for  an  issue  of  bonds  sufficient 
to  carry  out  this  agreement,  said  bonds 
to  be  sold  at  10%  discount,  and  also  pro- 
vide for  $150,000.00  bonds  in  treasury, 
and  give  a  balance  sheet  of  the  new  cor- 
poration after  the  organization. 


GRADED  CORPORATION  PROBLEMS 

CODE:  OILER.  prices  per  M  feet  to  remove  from  such 
Acting  through  an  agent  and  trustee,  lands  all  of  the  milling  timber.  The  syn- 
a  syndicate  acquires  the  following  assets  dicate  agrees  to  receive  as  consideration 
of  two  corporations  as  valued  by  ap-  $1,500,000  of  Lumber  Company's  pre- 
praisement  and  examination:  ferred  stock  and  $3,000,000  of  its  corn- 
Timber  lands  $  1,500,000.00    $  1,000,000.00  mon  stock 

?rTm:Vn!'logging      '"^'"^"^         '^"'"^'"^  ^he   syndicate   also   organizes    "Land 

outfits  100,000.00          150,000.00  Company"  and   sells  thereto  the  timber 

Mill  structures  and  lands  and  stumpage  contract  made  with 

equipment   200,000.00          250,000.00  Lumber  Company  and  agrees  to  receive 

Materials  and  sup-                               ■^ntw^nn  as  consideration     $1,500,000     of     Land 

plies  JU,LXA).00             30,000.00  ^                 j    c     ,        ^            i        i           i  ^.^ 

Logs   100,000.00          200,000.00  Company  s  first  mortgage  bonds  and  $1,- 

Lumber  230,000.00          320,000.00  400,000  of  its  capital  stock. 

Bills  and  notes  re-  In  organizing  these  companies  the  syn- 

„'=^^^b'^ 40,000.00           30,000.00  dicate  paid  into  the  treasury  of  Lumber 

counts  110,000.00          220,000.00  Company  $500,000    in   cash    for  a  like 

amount  of  its  common  stock  and  into  the 

$  3,000.000.00    $  3,000,000.00  treasury  of  Land  Company  $100,000  in 

This     syndicate     organizes     "Lumber  ^^^^    ^""^   ^   '^^^   ^"1°""^   of   its   capital 

Company"  and   sells  thereto  all  of  the  S.  '              ,    ,            ,           .        , 

above  property  and  accounts,  excepting  ^^^P^.^^.  ^  ^^^^"^^  ^^^t*  ^^  ^^^^  ^o"^" 

the  timber   lands.     The   syndicate    also  P^"^'  g?^^"^  ^^^^^  ^o  the  organization 

makes  a  stumpage  contract  with  the  com-  transactions  and  to  the  purchase  made 

pany,  conveying  the  right  at  stipulated  ^y  ^^^^  ^^°"^  ^^^  syndicate. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OLIO. 

The  American  Gas  Light  Company  had 
operated  a  gas  plant  since  the  beginning 
of  the  year  1896.  For  the  purpose  of  ac- 
quiring the  industry,  the  National  Gas 
Company  was  organized  April  1,  1899, 
with  a  capital  of  $100,000,  and  after  pur- 
chasing all  of  the  capital  stock  of  the 
American  Company,  issued  $100,000  of 
first   mortgage   6%    gold    bonds,   dated 


April  1,  1899,  due  April  1,  1929,  interest 
payable  Jan.  1  and  July  1  of  each  year. 

June  30,  1899,  the  two  companies  were 
united  by  a  certificate  of  merger,  and 
new  books  were  opened. 

The  accounts  of  the  American  Gas 
Light  Company  had  not  been  closed  at 
any  time  during  that  company's  exist- 
ence, and  at  the  date  of  the  merger,  stood 
as  follows : 


ASSETS : 

Land     and     buildings,     machinery, 

mains  and  franchises $  82,360.73 

Material  and  tools  1,856.30 

Coal,  including  freight 47,540.45 

Labor   50,668.73 

Repairs  13,872.46 

Water  and  other  supplies 3,869.39 

Superintendence  3,500.00 

Salary,  clerks  and  collectors 5,600.00 

Office  expense  2,100.00 

Insurance   1,435.00 

Taxes  4,237. 10 

Interest  1 ,450.40 

Cash    2,251.47 

Consumers'  accounts  3,210.44 

Other  accounts  receivable 2,121.90 


LIABILITIES  : 

Capital   $  50,000.00 

Bills  payable  5,000.00 

Accounts  payable  2,679.81 

Gas  account 157,683.33 

Coke  account  6,210.69 

Tar  account 4,500.54 


$  226,074.37 


$  226,074.37 


The  inventory  was  as  follows : 

Coal  $  400.00 

Coke   150.00 

Tar    100.00 


$  650.00 

In  acquiring  the  stock  of  the  American 
Company,  paying  organization  expenses 
etc.,  the  National  Company  used  all  its 
capital  stock  and  $90,000  first  mortgage 


bonds,  holding  in  reserve  $10,000  of 
bonds  for  improvements. 

Make  the  necessary  journal  entries  to 
open  the  books  of  the  new  company,  and 
prepare  a  balance  sheet  dated  June  30, 
1899. 

Also  prepare  a  profit  and  loss  account 
showing  the  average  annual  results  of 
the  operations  of  the  old  company. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OMIT. 

The  Smith  Brewing  Co.,  with  $1,000,- 
000  capital  stock,  the  Young  Brewing 
Co.,  with  $500,000  capital  stock,  and  the 
Star  Brewery,  with  $400,000  capital 
stock,  agree  to  consolidate  as  the  Uni- 
versal Brewing  Corporation,  the  new 
company  to  buy  all  the  properties  of  the 
old  companies,  at  a  valuation  to  be  fixed 
by  appraisal,  payment  therefor  to  be 
made  in  full-paid  stock  of  the  new  com- 
pany, the  old  companies  to  pay  off  their 
own  indebtedness. 

The  appraised  values  of  the  old  com- 
panies are  as  follows : 

SMITH  YOUNG  STAR 

Real  estate  and  build- 
ings     $  680,000     $  327,000     $  126,000 

Plant    390,000  160,000  71,000 

Cash  15,000  3,000  1,000 

Bills   receivable  10,000  6,000             

Horses,   wagons   and 

harness    4,000  3,000  1,500 

Office   furniture   1,000  1,000  500 

$  1,100.000     $  500,000     $  200,000 


On  this  valuation  the  Universal  Brew- 
ing Corporation  issued  $2,000,000  of 
stock,  shares  $100  each,  which  was  di- 
vided pro  rata  among  the  old  companies 
on  the  basis  of  their  appraised  value,  no 
fractional  shares  of  stock  to  be  issued, 
odd  amounts  to  be  paid  old  companies  in 
cash. 

Give  journal  entries  necessary  to  set 
up  the  property  accounts  and  credit  old 
companies  with  their  pro  rata  on  books 
of  the  new  company. 


GRADED    CORPORATION    PROBLEMS 


CODE:  OMITTED. 

At  the  time  of  the  consolidation  the 
ledger  accounts  of  the  Star  Brewery 
were  as  follows : 

ASSETS ; 

Real  estate  and  buildings.... $  250,000.00 

Plant  247,000100 

Cash   1 ,000.00 

Horses,  wagons  and  harness 1,800.00 

Office  furniture  1,200.00 

$  501,000.00 


LIABILITIES  : 

Capital  stock $  400,000.00 

Bills  payable 50,000.00 

Accounts  payable 51,000.00 

$  501,000.00 

Make  the  proper  journal  entries  to 
liquidate  in  stock  of  the  new  company 
the  liabilities  other  than  capital  stock,  to 
apportion  the  remaining  stock  and  cash, 
and  to  close  the  books  of  the  Star  Brew- 
ery. 


GRADED  CORPORATION  PROBLEMS 


CODE:  ONE. 

The  stockholders  of  "A"  Company  and 
"B"  Company  have  decided  to  form  a 
new  corporation  ("C"  Company),  which 
is  to  take  over  all  the  assets  and  assume 
all  the  liabilities  of  both  the  old  compa- 
nies. The  holders  of  preferred  stock  of 
the  old  companies  are  to  receive  an  equal 
number  of  shares  of  preferred  stock  of 
the  new  company.  The  holders  of  the 
common  stock  are  to  take  common  stock 
of  the  new  company,  at  par,  to  an  amount 
equal  to  the  book  value  of  their  holdings 
in  the  old  companies.  Before  determin- 
ing the  book  value  of  the  old  common 
stock,  however,  an  amount  equal  to  two 
per  cent  of  the  accounts  and  bills  receiv- 
able of  each  company  is  to  be  deducted 
from  its  surplus  and  carried  to  a  reserve 
account,  to  provide  for  contingent  losses. 

The  condition  of  the  old  companies  is 
as  follows : 

assets: 

"A"  Co.  "B"  Co. 

Cash    $         20,231.74     $         43,123.81 

Accounts   receivable  296,059.14  759,911.06 

Bills   receivable  8,245.08  35,342.09 

Merchandise    inventory....         212,636.81  393,937.46 

Land   and  buildings 42,689.42  174,156.97 

Machinery     31,222.97  69,160.35 

Furniture   and   fixtures....             2,500.00  5,000.00 

Investments    8,000.00  4,550.00 

Prepaid   taxes  and   ins 1,014.20  2,346.48 

$      622,599.36     $  1,487,528.22 


liabilities: 

Accounts   payable   $      204,669.18  $      244,168.44 

Bills   payable   86,844.10  227,454.72 

Preferred  stock  100,000.00  200,000.00 

Common  stock  150,000.00  400,000.00 

Surplus    .    81,086.08  415,905.06 

$      622,599.36     $   1,487,528.22 

The  holders  of  common  stock  in  the 
old  companies  are  as  follows : 

"a"  CO.  "b"  CO. 

Smith    400  shares     1,200  shares 

Jones   300      || 

Brown    150 

Black   50      "  2,000      " 

White   600      " 

Green  500      " 

Henry    300      " 

1,500       "  4,000      " 

Draft  the  journal  entries  necessary  to 
create  the  reserve  accounts  in  the  books 
of  each  of  the  old  companies. 

Show  the  final  book  value  of  common 
stock  of  each  of  the  old  companies. 

Show  the  number  of  shares  of  common 
.stock  of  the  new  company  to  be  received 
by  each  of  the  holders  of  common  stock 
of  the  old  companies. 

Prepare  a  balance  sheet,  showing  con- 
ditions of  "C"  Company,  after  taking 
over  the  assets  and  liabilities  of  the  old 
companies. 


GRADED  CORPORATION  PROBLEMS 

CODE:  OOZY. 

It  is  proposed  to  organise  a  corpora-  For   the   purpose   of   the   issuance   of 

tion    for   the   purpose    of   acquiring   the  stock  in  the  new  company  to  the  holders 

stock  and  controlling  three  existing  cor-  of  stock  in  the  three  existing  companies, 

porations,   "A",    "B"   and   "C",   two   of  it  is  proposed  to  capitalize  the  latter  upon 

which  latter,  "A"  and  "B",  have  been  in  the  following  basis: 

operation   for  five  and  three  years,   re-  Money  assets   at   double   their  value ; 

spectively,  while  "C"  has  been  newly  or-  plant  at  80%  of  book  values ;  material  at 

ganized.    The  assets  and  liabilities  of  the  70%  of  book  values ;  annual  net  earnings 

several  existing  companies  and  the  divi-  at  8%,  and  liabilities  at  par. 

dends  paid  are  as  follows :  The  new  company  will  be  organized 

"^^^IV         ..g,,          .<c"  with  a  capital  stock  of  $2,200,000,  all  of 

Plant  $  400,000    $  300,000    $  which  is  to  be  used  in  acquiring  the  stock 

Material   295,000         425,000  r  , ,             ...                             .   ^             * 

Cash  40,000        15,000       500,000  ot  the  existmg  companies. 

$^^3^:^    il^^o    i^^^o  (1)   What  amount  of  stock  in  the  new 

company  are  the  owners  of  the  stock  in 

liabilities:       ^            ^  ^^^j^  ^£  ^j^^  existing  companies  entitled  to 

Capital  $  100,000    $  300,000    $  500,000  receive'* 

Surplus    60,000            40,000  /^n     )-•                    i        ^          •^-    ■               ..       i  • 

m>  bonds,  5-year 500,000      300,000  (2)  Cjive  a  short  cnticism   attacking 

Current  Liabilities 75,000      100.000 the  abovc  basis  of  stock  allotment  and 

$  735,000    $  740,000    $  500,000  submit  a  more  equitable  basis. 

DIVIDENDS    paid:  , 

"A"              "B"              "C" 
$  120,000     $     30,000     $    


GRADED  CORPORATION  PROBLEMS 


CODE:  OPERA. 

A  company  is  incorporated  for  the 
purpose  of  acquiring  and  operating  the 
plant  and  goodwill  of  three  previously 
independent  concerns,  the  authorized 
capital  being  $1,000,000.00,  half  of  which 
is  common  and  half  preferred  stock.  The 
total  stock  and  $100,000  are  issued  to  the 
vendor,  in  payment  of  the  several  prop- 
erties acquired  through  him. 

The  vendor  disposes  of  $200,000  of 
preferred  stock  to  bankers  at  par  with  a 
bonus  of  one  share  of  common  stock  for 
each  two  shares  of  preferred  stock,  and 
he  also  sells  $400,000  of  the  common 
stock  at  50%.  The  price  paid  by  the 
vendor  for  the  three  plants  acquired  are 
( 1 )  $100,000 ;  ( 2 )  $200,000  ;  (  3 )  $300,000, 
each  of  which  is  payable  one-half  in  pre- 
ferred and  one-half  in  cash. 

The  properties  are  found  to  be  in  a 
"run  down"  condition  and  the  company 
expends  during  the  first  year  $75,000  in 


renewals  and  repairs  to  bring  the  plant 
to  a  state  of  efficiency,  all  of  which  is 
charged  to  revenue.  On  a  review  of  the 
accounts  it  appears  that  only  $15,000.00 
of  said  outlay  was  for  replacement  and 
$60,000  is  accordingly  transferred  to  the 
plant  account  in  the  proportion  of  (1) 
$30,000.00,  (2)  $20,000.00,  (3)  $10,- 
000.00. 

For  the  purpose  of  determining  and 
separately  stating  the  intrinsic  plant  val- 
ues and  goodwill  after  the  additional  out- 
lay, the  properties  were  appraised  under 
four  general  divisions  and  the  result  of 
the  appraisement  was  as  follows : 

12  3 

"A"    $     25,000     $     60,000  $     85,000 

"B"    75,000          100,000  175,000 

"C"   2,000              5,000  7,000 

"D"  8,000            18,000  25,000 

$  110,000     $  183,000     $  292,000 

Frame  the  journal  entries  to  open  the 
books  of  the  company  in  accordance  with 
the  above  statement. 


GRADED  CORPORATION  PROBLEMS 


CODE:  ORDURE. 

The  Adams  Company  was  organized 
July  1,  1905,  under  the  laws  of  the  State 
of  Michigan,  with  an  authorized  capital 
stock  of  $100,000,  divided  into  1,000 
shares  of  $100  each.  Their  operations 
have  not  been  very  successful ;  their 
stock  has  never  paid  any  dividends,  and 
their  capital,  at  present,  is  impaired.  The 
stockholders  at  a  meeting  decided  to  re- 
organize the  company,  and  for  that  pur- 
pose a  committee  was  appointed  to  have 
the  properties  appraised  and  to  take  such 
measures  as  they  would  deem  advisable. 
The  condition  of  affairs  as  disclosed  by 
the  books  is  as  follows : 

Real  estate  and  buildings.. .$  35,000.00 

Plant  and  machinery 28,000.00 

Equipment   and   fixtures 14,000.00 

Tools    3,000.00     $     80,000.00 

INVENTORIES: 

Finished  goods  $     27,500.00 

Raw  material  11,500.00 

Supplies    5,300.00  44,300.00 

Organization   expenses $       8,000.00 

Less  amount  written  off....  3,000.00  5,000.00 

Capital  stock  100,000.00 

Treasury  stock  5,000.00 

Bonded  indebtedness  25,000.00 

Treasury  bonds   .         5,000.00 

•Accounts  receivable 87,700.00 

Notes  receivable 17,800.00 

Cash    3,200.00 

Notes  payable  26,200.00 

Accounts  payable  82,000.00 

Loans  payable  26,000.00 

The  Baker  Company  is  a  corporation 
also  organized  under  the  laws  of  this 
state,  and  in  existence  for  the  last  five 
years.  The  capital  stock  of  this  com- 
pany is  $150,000,  divided  into  1,500 
shares  of  $100  par  value.  The  company 
has  paid  an  annual  dividend  of  9  per 
cent  since  organization,  and  their  yearly 
net  profits  were  as  follows : 

First  year  $  34,500.00 

Second  year  33,000.00 

Third  year  35,000.00 

Fourth  year  35,000.00 

Fifth  year  30,500.00 

Having  learned  of  the  financial  embar- 
rassment of  the  Adams  Company,  and 
desiring  to  get  possession  of  their  build- 
ings and  real  estate,  which  are  adjacent 
to  the  Baker  Company's  property,  they 
propose  to  the  committee  of  the  Adams 
Company  that  the  two  corporations  be 
amalgamated.     A    consolidation    agree- 


ment was  drawn  up,  containing  among 
others,  the  following  provisions : 

(1)  The  charter  of  the  Baker  Com- 
pany is  to  be  amended  and  the  name 
changed  to  that  of  the  Consolidated  Man- 
ufacturing Company,  the  latter  to  absorb 
the  stock  of  the  Adams  and  Baker  Com- 
panies, respectively. 

(3)  The  current  assets  of  the  Adams 
Company  are  to  be  taken  over  at  their 
book  value,  except  that  a  reserve  of  5% 
be  deducted  on  notes  and  accounts  re- 
ceivable. 

(3)  The  fixed  assets  are  to  be  taken 
over  on  the  following  basis : 

(a)  Real   estate   and   buildings   at 
15%  increase  of  book  value. 

(b)  Plant  and  machinery  at  85% 
of  book  value. 

(c)  Equipment  fixtures  at  80%  of 
book  value. 

(d)  Tools  at  60%  of  book  value. 

(e)  Organization  expenses  are  not 
to  be  considered  at  all. 

(4)  The  Consolidated  Manufactur- 
ing Company  to  assume  the  liabilities  of 
the  Adams  Company  to  the  public,  and 
to  issue  to  the  latter  capital  stock  for  the 
excess  of  the  assets  over  the  liabilities. 
If  there  be  any  fractional  sum  of  $100 
the  Adams  Company  is  to  receive  a  full 
$100  share  for  such  fractional  part. 

(5)  The  assets  of  the  Baker  Com- 
pany are  to  be  taken  over  at  their  book 
value,  and,  in  addition,  the  company  is 
also  to  be  given  stock  for  the  goodwill, 
the  latter  to  be  based  on  the  last  three 
years'  net  profits,  and  is  to  be  60%  of 
that  total. 

(6)  The  Consolidated  Manufactur- 
ing Company  is  to  provide  for  a  bond 
issue  of  $100,000,  with  which  it  is  to 
take  up  the  outstanding  bonds  of  the 
Adams  Company,  and  to  sell  the  balance 
in  order  to  raise  cash  funds ;  the  stock- 
holders of  each  respective  company  to 
have  the  privilege  of  taking  the  bonds 
at  96. 

(7)  The  Consolidated  Manufactur- 
ing Co.  to  assume  all  liabilities  of  the 
Baker  Co.  to  the  public. 


GRADED    CORPORATION    PROBLEMS 


CODE :    ORDURE— Continued. 

Assuming  that  the  last  balance  sheet 
of  the  Baker  Co.  which  is  taken  to  pre- 


sent the  true  condition  of  this  concern, 
discloses  the  following  state  of  affairs : 


BALANCE    SHEET    OF    THE    BAKER    COMPANY 
AS    ON    ,    1908. 

CURRENT   assets:  CURRENT    LIABILITIES: 

Cash    $     11,740  Notes   payable $     26,500 

Notes  receivable $       9,350  Accounts  payable 87,500  $  114,000 

Accounts    receivable 74,030  

$     83,380 
Less    reserve    for    bad 

debts    4,169  79,211 

Inventories: 

Raw    material $  9,840 

Goods  in   process 8,750 

Finished   goods  121,550       140,140 

Total  of  current   as- 

sets     $  231,091        ^      .,  ,     ,     ,  ^■''■•^^'-  Ti^-^o  nnn"-"^' 

Fixpn  AssFTs-                                              Capital  stock  $  150,000 

Buildings .  .  $  IS                                              Surplus    101,000       251,000 

Less  depreciation 1,000  $     19,000 

Plant  and  machinery $     85,700 

Less  depreciation 8,570         77,130 

Equipment   and   fixtures.. $     34,900 
Less  depreciation 3,490         31,410 

Tools    (revalued)    6,369  6,369 

Total  of  fixed  assets....  133,909 

$365,000 


$365,000 


You  are  required  to  give :  (a)  Closing 
entries  for  the  Adams  Co.  (b)  Journal 
entries  for  the  Consolidated  Manufactur- 
ing Co.  covering  capitalization,  issue  of 
bonds — taking  for  granted  that  the  stock- 
holders of  the  Adams  and  Baker  Co.  took 
advantage  of  their  rights  with  regard  to 
purchase   of   bonds — and   also   payments 


to  be  made  to  the  state  and  county  au- 
thorities, (c)  Balance  sheet  of  the  Con- 
solidated Manufacturing  Co.,  placing  the 
assets  of  Adams  Co.  at  the  value  as 
shown  by  the  latter's  books,  crediting  the 
difference  between  the  price  paid  for 
them  and  the  revaluation  to  goodwill 
paid  to  the  Baker  Co. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OPERATE. 

The  composition  of  the  values  of  the 
books  of  the  three  old  companies  ab- 
sorbed as  stated  in  the  preceding  problem 


were: 

assets: 
1 

Property  sold   $     80,000 

Book  accts.,   not   sold..         1,000 


$  163,000 
3,000 


3 

282.000 
5,000 


$     81,000     i  166,000     $  287,000 


liabilities: 
1 
Bills  and  accounts  set- 
tled by  old  company,$     49,000 

Undivided  profits  2,000 

Capital  stock  30,000 


$  100,000 

6,000 

60,000 


$  189,000 

8,000 

90,000 


81,000     $  166,000     $  287,000 


Frame  the  journal  entries  for  closing 
the  books  of  the  old  companies  accord- 
ing to  the  above  statement. 


GRADED  CORPORATION  PROBLEMS 


CODE:    OPTIC. 

A  merger  was  made  of  six  corpora- 
tions with  the  following  assets : 
FIRST  CORPORATION. 

ASSETS : 

Plant  and  franchises .' $  600,000.00 

Cash  20,000.00 

Book  accounts  receivable 100,000.00 

Supplies  10,000.00 

!  rAPILITIES  : 
v^jioit^ril  stock  * 

Common  ($50.00)  $  200,000.00 

Preferred   200,000.00 

Bond  account  250,000.00 

Book  account  payable 30,000.00 

SECOND  CORPORATION. 

ASSETS  : 

Plant  and  franchises $  1,000,000.00 

Cash  30,000.00 

Book  accounts  receivable 180,000.00 

Supplies  40,000.00 

LIABILITIES  : 

Capital  stock   ($50.00) $     500,000.0) 

Bond  account  750,000.00 

Book  account  payable 50,000.(X) 

The  other  four  corporations  each  had 
a  capital  stock  of  $1,000,  of  which  $100 
each  was  paid  for  organization  expenses, 
leaving  a  balance  in  cash  in  the  treasury 
of  each  company  of  $900. 

A  corporation  was  formed  to  purchase 
all  the  capital  stock  of  the  merged  cor- 
porations, and  create  a  bond  and  mort- 
gage sufficient  to  retire  the  outlying 
bonds  of  the  corporations  merged,  to- 
gether with  the  capital  stock  and  bonds 
of  the  following  corporations  having  the 
following  assets  and  liabilities : 
"A." 

ASSETS  1 

Plants  and  franchises '. $  1,000,000.00 

Book  accounts  receivable 70,000.00 

Cash  50,000.00 

Supplies  10,000.00 

LIABILITIES  : 

Capital  stock $  500,000.00 

Bonds  500,000.00 

Book  accounts  payable 80,000.00 

"B." 

ASSETS : 

Plant  and  franchises $  10.000.00 

Cash 5,000.00 

Book  accounts  receivable 3,000.00 

Supplies 1 .000.00 


LIABILITIES  : 

Capital  stock   ($50.00) $       10,000.00 

Bond  accounts  payable 5,000.00 

In  addition  to  the  new  corporation  be- 
ing the  holding  corporation  of  the  stock 
of  the  above  corporation,  a  merger  of 
three  other  corporations  was  made,  the 
business  to  be  carried  on  under  the  name 
of  the  new  corporation  formed,  and  the 
combined  assets  and  liabilities  of  the  cor- 
poration so  merged  were  as  follows : 

ASSETS : 

Plant  and  franchises .' $  2,500,000.00 

Cash  50,000.00 

Book  accounts  receivable 100,0(X).00 

Supplies 20,000.00 

LIABILITIES  : 

Capital  stock   ($50.00) $  1,000,000.00 

Bonds  1,500,000.00 

Book  accounts  payable 150,000.00 

It  was  agreed  to  purchase  the  stock  of 
the  above  corporations  at  the  following 
rates,  to  be  paid  for  in  stock  of  the  new 
corporation : 

(Corporation  No.  1  at  20  shares  new 
company  for  one  of  old. 

Corporation  No.  2  at  9  shares  new 
company  for  one  of  old. 

The  four  other  companies  par  $20.00 
share  for  share  and  corporation  "A"  share 
for  share.  Corporation  "B,"  2  shares  of 
new  company  stock  for  one  of  old. 

The  capital  stock  of  the  other  three 
corporations  which  the  new  company 
proposed  to  operate  were  exchanged 
.share  for  share.  All  of  the  expenses  of 
both  mergers  and  organization  of  the 
new  corporation  amounting  to  $50,000 
were  to  be  paid  by  the  new  corporation, 
and  it  was  agreed  that  bonds  amounting 
to  $1,000,000  should  be  issued  to  be  used 
in  betterments  of  the  corporations  of 
which  they  had  purchased  the  entire  cap- 
ital stock.    ■ 

Show  entries  for  opening  the  books  of 
the  first  six  corporations  merged.  Pro- 
vide capital  stock  and  bond  issue  to  cover 
the  requirements  above  stated  and  show- 
opening  entries  for  new  corporation. 


GRADED  CORPORATION  PROBLEMS 


CODE:  ORDER. 

The  following  is  abstracted  from  an 
agreement  of  merger  and  consolidation 
made  Dec.  31,  1908,  between  the  Penn- 
sylvania Tool  Co.,  party  of  the  first  part, 
and  the  Keystone  Tool  Co.,  party  of  the 
second  part.  Said  parties  of  both  parts, 
being  corporations  duly  organized  and 
existing  under  the  laws  of  the  State  of 
Pennsylvania,  by  this  agreement  merge 
and  consolidate  into  a  single  corporation. 

The  name  of  the  corporation  hereby 
formed  by  said  consolidation  shall  be  crte 
Pennsylvania  Tool  Co. 

The  amount  of  capital  stock  of  the  new 
corporation  is  $100,000,  all  of  which  shall 
be  common  stock,  divided  into  1,000 
shares  of  a  par  value  of  $100.  The  man- 
ner of  distributing  capital  stock  shall  be 
as  follows : 

The  capital  stock  of  the  Pennsylvania 
Tool  Co.,  party  of  the  first  part,  shall  be 
exchangeable  for  capital  stock  of  the  new 
corporation,  share  for  share,  and  the  bal- 
ance of  the  capital  stock  of  the  new  cor- 
poration hereby  formed  shall  be  distrib- 
uted to  the  stockholders  of  the  Keystone 
Tool  Co.,  in  proportion  to  their  present 
holdings. 

The  Pennsylvania  Tool  Co.,  party  of 
the  first  part,  was  incorporated  shortly 
before  the  date  of  merger,  and  had  trans- 
acted no  business  other  than  the  issuance 
of  ten  shares  of  capital  stock,  $100  each, 
for  which  payment  of  $1,000  had  been 
received,  and  which  was  on  hand  in  the 
treasury  of  the  company  on  the  date  of 
the  merger,  and  directly  after  the  merger 
transferred  to  the  bank  deposit  account  of 
the  consolidated  company  and  credited  to 
an  account  called  "Suspense." 

The  Keystone  Tool  Co.  had  for  a  num- 
ber of  years  been  actively  engaged  in 
business.  Its  fiscal  year  ended  Sept.  30, 
1908,  at  which  time  an  inventory  was 
taken,  and  its  accounts  had  been  prop- 
erly closed.     At  the  date  of  the  merger 


the   following  trial   balance   was   drawn 
from  the  books : 

DEBITS  CREDITS 

Cash   $     20,000.00     $ 

Accounts  receivable 15,000.00 

Mdse.  inv.,  Sept.  30,  1908 130,000.00 

Mdse.  purchases  250,000.00 

Expenses   25,000.00 

Accounts  payable 10,000.00 

Sales   300,000.00 

Capital  stock  30,000.00 

Undivided     profits,     balance 

Sept.  30,  1908 100,000.00 

Totals   , $  440,000.00     $  440,000.00 

The  account  books  of  this  concern  were 
not  closed  at  the  date  of  the  merger  and 
no  inventory  was  taken,  although  the  ex- 
change of  capital  stock  was  effected  and 
all  business  after  Dec.  31,  1908,  was 
transacted  under  the  name  of  the  Penn- 
sylvania Tool  Co.  It  was  not  until 
March  31,  1909,  that  an  accountant  was 
asked  to  state  the  accounts  of  the  new 
company  from  the  date  of  consolidation. 

At  March  31,  1909,  before  the  account- 
ant had  commenced  his  work,  an  inven- 
tory was  taken  which  showed  the  value 
of  merchandise  on  hand  as  at  that  date 
to  be  $216,250,  and  the  following  trial 
balance  was  abstracted  from  the  books : 

TRIAL  BALANCE,  MARCH  31,  1909. 

DEBITS  CREDITS 

Cash   $     26,000.00     $ 

Accounts    receivable 10,000.00 

Mdse.  inv.,   Sept.  30,   1908....     130,000.00 

Mdse.  purchased  600,000.00 

Expenses  60,000.00 

Accounts  payable  10,000.00 

Sales   685,000.00 

Suspense    1,000.00 

Capital  stock  30,000.00 

Undivided  profits  100,000.00 

Totals   ■■$  826,000.00     $  826,000.00 

Prepare  a  balance  sheet  of  the  consol- 
idated company  as  at  March  31,  1909, 
and  the  profit  and  loss  accounts  arrang- 
ed to  show  the  profits  of  the  consolidated 
company  for  three  months  ending  March 
31,  and  of  the  Keystone  Tool  Co.,  for 
three  months  ending  Dec.  31st ;  also  state- 
ments showing  the  disposition  of  profits 
taken  over  by  the  new  company. 

State  what  basis  you  make  use  of  in 
determining  the  approximate  value  of 
merchandise  on  hand  at  Dec.  31st. 


GRADED    CORPORATION    PROBLEMS 


CODE:  ORIENTAL. 

The  Gendron  Corporation  operates  Coal  Mines,  Saw  Mills,  a  Log- 
ging Railroad  and  have  their  own  timber  holdings. 

All  of  the  accounts  are  kept  in  one  large  ledger,  with  the  usual 
books  of  original  entry,  at  the  general  office  in  New  York.  They  engage 
the  services  of  yourself  to  audit  the  books  for  the  year  ending  June  30, 
1909.    The  following  is  a  copy  of  the  Trial  Balance. 

QENDBON  COBFOBATXON. 

Trial  Balance— Jnne  30,  1909. 

Plant  Equipment — Mine  A    $  31,955.26 

New  Plant— Mine  7     62,173.27 

Stumpage,  cut  for  sawmill   7,524.26 

Capital   Stock    ?581,500.00 

Betterment  to  Mines  3  and  4 2,783.42 

Local  Purchase  Logs    51.66 

Sawmill  Repairs 1,360.31 

Cash     7,436.05 

Development — Mine  No.  1   3,822.37 

Timber  and  Land 240,305.26 

Planing  Mill  Repairs    341.43 

Accounts  Receivable 76,421.91 

Mine  Engineering  Tools — Mine  1   225.00 

Petty  Cash — Mines    750.00 

Lumber — Outside  Purchases    79.20 

Lighterage  on  Lumber 57.95 

Mine  Administrative  Salaries  and  Supplies 2,195.22 

Petty  Expenses  at  Mines 1,649.28 

Tenant  Houses  at  Mines 2,117.22 

Lumber,  Logs,  Etc.,  on  Hand 50,853.60 

Sawmill  Pay  Roll    4,141.41 

Planing  Mill  Pay  Roll   2,421.95 

Commissary  Purchases — Lumber   8,642.58 

Feed  and  Labor — Mine  Stables 925.75 

Electrical  Repairs  at  Mine 467.97 

Commissary  Pay  Roll — Lumber   726.65 

Logging  Pay  Roll    200.00 

Unexpired  Insuiarce  Premiums    3,918.49 

Mine  Cars    6,139.78 

Lath  Mill  Pay  Roll 249.65 

Electrical  Plant — Mine     3,190.00 

Interest      on      Loans      Covering      Mine      Plant 

Construction    7,226.73 

Mines  Warehouse — Stock  on  Hand 1,743.22 

Lath  Mill  Repairs   7.27 

Railroad  Equipment    74,710.38 

Railroad  Pay  Roll  and  Expenses 2,241.86 

Camp  Equipment   22,192.34 

Camp  Pay  Roll 1,549.75 

Yard  and  Shed  Repairs   112.10 

Logging  Railroad  Track   47,769.13 

Office  Salaries — Lumber    1,021.67 

Unclaimed  Miners'  Wages    246.17 

Coal  Sales    57.280.78 

Building  Material  on  Hand  at  Mine 810.75 

Interest  on  Funds  to  Develop  Mine  No.  1 240.00 

Mine  Office  Furniture  and  Fixtures 1,459.17 

Mine  Officer's  House  Furnishings 513.29 

Mine  Railroad  Track  and  Switches   3,916.82 

Telephone  Line — Mill  to  Woods   436.56 

Freight  on  Logs  to  Sawmill 1,614.40 

Camp  Boarding  House  Equipment   1,500.00 

Interest  ^d  Discount — Lumber    422.09 

Mine  Store  Expense  and  Labor    2,472.83 

Mine  Store  Freight   472.98 

Sawmill  Machine  Shop 2,328.53 

Outside  Investment 1,949.90 

Advanced  to  New  Coal  Corporation 1,373.27 

Mill   Plant    324,982.92 

Lumber  Sales    28,033.11 

Lath  and  Shingle  Sales   2,392.45 

Insurance — Mill    85.30 

Operation  Chicago  Office — Lumber    1,000.00 

Allowances  and  Discounts — Coal  Shipments 637.40 

Repairs  and  Expenses — Mine  Stables 124.22 

Mine  Office — Salaries  and  Supplies    1,562.23 

Mine  Eng. — Salaries  and  Supplies — Mine  No.  1..  625.00 


GRADED    CORPORATION    PROBLEMS 


CODE :  ORIENTAL— Concluded. 

Traveling  Expenses — Mine  Manager 221.67 

Interest — Current  Loans  at  Mine 125.00 

General  Office  Expenses — Lumber    853.80 

Discount  on  Lumber  Sold 1,931.60 

Bills  Payable    172,667.50 

Accounts  Payable — Audited    24,287.03 

Bonds  on  Timber  Lands    35,000.00 

Taxes — Mines    178.53 

Insurance — Mines    1,271.11 

Legal  Expense — Mines 785.00 

Royalty   on    Coal    Mined 4,989.77 

Mining  Labor    29,871.23 

Surplus    195,764.45 

Sales  of  Wood 186.00 

Rent  of  Dwellings  and  Miscellaneous  Income — 

Lumber    278.00 

Yard  Filling  and  Tunnel  Extensions  at  Mines.  .  .  2,743.22 

Delivery  of  Coal  to  Tipple 3,571.28 

Maintenance  of  Way — Mines   710.11 

Maintenance  of  Air — Mines    739.10 

Props,  Ties  and  Caps   497.17 

Mine  Foreman — Salary    800.00 

Maintenance  of  Mine  Cars    209.38 

Mine  Machinists  and  Engineers  Wages 1,378.78 

Smithing — Mines    672.10 

Fuel — Mine  Power  House 297.51 

Removal  of  Slate 551.98 

Deadwork  at  Mines 47.21 

Electrical  Supplies  at  Mines   2,488.55 

Insurance  During  Construction  of  Mine  Plant.  .  937.97 

Norfom  &  Western  Ry.  Claim§  at  Mines 71.59 

Repairs  to  Miners'  Houses   171.19 

Legal  Expense^ — In  re  Right  of  Way  to  Mines.  .  .  342.68 

Live  Stock  at  Mine 3,850.00 

Taxes  During  Construction  of  Mines  Plant 313.71 

Mine  Commissary  Purchases 8,427.60 

Rental  from  Miners'  Houses   1,572.27 

Cartage  and  Sale  of  Coal  to  Tenants 70.09 

$1.099,277.85       $1,099,277.85 

They  have  agreed  to  a  plan  whereby  the  Coal  Mine  operations  will 
be  taken  over  by  a  new  corporation  and  therefore  ask  that  you  separate 
the  Lumber  and  Coal  Accounts,  make  up  a  separate  set  of  statements 
in  detail  to  cover  each  business  (Balance  Sheet,  Surplus  Account, 
Profit  and  Loss  Account  and  Statement  of  Operations).  The  Capital 
Stock  to  stand  as  part  of  the  Lumber  Accounts. 

You  find  as  follows: 

(1)  Bills  Receivable  Account  was  balanced  and  closed,  but  among 
the  records  and  papers  of  the  company,  you  found  Bills  Receivable  for 
Lumber  Accounts  amounting  to  $2,791.17  previously  charged  off,  but 
now  considered  good  and  collectible. 

(2)  Mine  No.  1  is  in  a  state  of  development  and  has  not  been  as 
yet  operated. 

(3)  Of  the  Accounts  Receivable,  $15,180.92  cover  coal  shipments. 

(4)  Of  the  Bills  Payable,  $50,725.00  cover  mine  investments. 

(5)  Unexpired  Insurance  Premiums  include  $726.10  on  mine 
policies  paid  for  account  of  the  new  corporation. 

(6)  Taxes  paid  in  advance  $78.53  on  mine  properties. 

(7)  Of  the  surplus  before  closing  the  accounts  $98,958.44  arises 
from  mine  operations  prior  to  the  year  ending  June  30,  1909. 

(8)  Of  the  Accounts  Payable,  $12,790.79  cover  mine  bills  auditeu 
Show   the   necessary   journal   entries   to   adjust   the   accounts   in 

accordance  with  the  foregoing  explanations. 


GRADED    CORPORATION    PROBLEMS 


CODE:  ORIENTALIST. 

The  Potlatch  Lumber  Mfg.  Co.  is  incorporated  for  $1,500,000.00,  of 
which  the  Gendron  Corporation  subscribed  for  25%,  the  Block  Lumber 
Co.,  50%,  and  the  Columbia  River  Lumber  Co.,  25%.  The  Potlatch  Co. 
agreed  to  take  over  the  lumber  business  of  each  of  the  three  concerns 
named.  It  is  understood  that  balances  due  to  the  contributing  com- 
panies on  purchase  account  are  to  be  applied  as  part  payment  of  their 
stock  subscription. 

(a)  The  Gendron  Corporation  agrees  to  dispose  of  its  plant  for 
$250,000.00,  reserving  its  timber  holdings;  railroad  and  other  equip- 
ment; amount  due  from  Black  Diamond  Fuel  Co.  on  account  of  mining 
department  advances  and  $8,000.00  of  Accounts  Receivable  not  con- 
sidered collectible.  Also  it  assumes  all  liabilities  except  Accounts 
Payable. 

(b)  The  other  companies  submit  the  following  Balance  Sheets: 

BXiOCK  I.UMBEB  CO. 

Balance  Sheet. 

Cash  on  Hand  and  in  Bank $     6,410.81 

Bills   Receivable    2,131.55 

Bills  Payable   $77,191.94 

Lumber,  Logs,   Etc 52,176.59 

Unexpired  Insurance  Premiums 1,317.58 

Mill  Supplies  and  Extras 819.26 

Teams     2,859.65 

Standing  Timber  and  Lands 300,000.00 

Accounts  Payable 15,197.94 

Surplus     401,321.76 

Mill  Plant 60,500.00 

Accounts  Receivable    67,496.20 

$493,711.64     $493,711.64 

COI.UMBIA  BIVEB  IiUMBBB   CO. 

Balance  Sheet. 

Cash $  438.72 

Bills  Receivable    6,008.91 

Lumber,  Logs,  Etc 97,303.43 

Unexpired  Insurance  Premiums 417.93 

Mill  Supplies,  Etc 742.59 

Teams     62.50 

Bills  Payable   $39,604.38 

Standing  Timber  and  Lands  42,811.83 

Tug  Boat     2,019.39 

Outside  Investments   6,300.00 

Mill  Plant   30,000.00 

Accounts  Payable 7,912.84 

Surplus     172,093.42 

Accounts  Receivable    33,505.34 


$219,610.64     $219,610.64 

(1)  Draft  opening  entries  for  the  Potlatch  Lumber  Mfg.  Co. 

(2)  Prepare  Balance  Sheet  after  books  have  been  opened. 

(3)  Draft  closing  entries  for  the  Gendron  Corporation. 

(4)  Prepare  General  Balance  Sheet  of  the  Gendron  Corporation 
after  so  doing. 


GRADED    CORPORATION    PROBLEMS 


CODE:  ORIENTALISM. 

The  Black  Diamond  Fuel  Co.  secures  a  charter  and  capitalizes  with 

an  authorized  issue  of  $250,000.00  Common  Stock  and  $200,000.00  o< 

Preferred  Stock.    The  Common  Stock  is  subscribed  for  as  follows : 

The  Gendron  Corporation $150,000.00 

W.  "Wilson 50,000.00 

A.  Smith    50,000.00 

on  the  following  terms: 

(a)  The  Gendron  Corporation  to  transfer  all  assets  and  liabilities 
as  shown  by  your  statement  covering  the  mines  property  to  the  Black 
Diamond  Fuel  Co.  Any  equity  to  apply  as  part  pajrment  on  the  sub- 
scription, balance  to  be  paid  on  call. 

(b)  Wilson  and  Smith  each  to  pay  $25,000.00  in  cash,  balance  on 
call. 

Show  the  proper  entries: 

(1)  To  make  the  transfer  on  the  books  of  the  Gendron  Corpora- 
tion, and 

(2)  Entries  to  open  books  of  Black  Diamond  Fuel  Co.  and  balance 
sheet  after  so  doing. 


GRADED  CORPORATION  PROBLEMS 


CODE:  ORISON. 

In  accordance  with  the  provisions  of  a 
plan  drawn  by  its  prospective  manager, 
a  syndicate  is  created  for  the  purpose  of 
obtaining  control  of  certain  business  in- 
terests at  present  organizing  in  a  neigh- 
boring state.  The  members  of  the  syn- 
dicate have  in  consequence  contributed 
$1,500,000  in  cash,  which,  pending  devel- 
opments, has  been  invested  in  railway 
bonds,  acquired  at  par,  and  placed  in  the 
hands  of  a  trustee. 

In  due  course  the  trustee  enters  into 
an  agreement  with  the  A.  K.  Company, 
organized  with  an  authorized  issue  of  $3,- 
500.000  of  capital  stock,  of  which  2,000 
shares  have  already  been  subscribed  to 
and  paid  for  by  incorporators  and  oth- 
ers. According  to  the  terms  of  the  agree- 
ment, the  trustee  is  to  deliver  to  the  com- 
pany the  securities  that  he  holds,  plus 
$700,000  in  cash,  in  exchange  for  the 
company's  potential  stock.  In  case,  how- 
ever, the  trustee  should  fail  to  pay  the 


cash  into  the  company's  treasury  within 
30  days,  he  is  to  return  to  the  company 
two  shares  of  stock  for  every  $100  of 
cash  not  paid. 

The  members  of  the  syndicate  having 
failed  to  respond  to  the  demand  of  the 
trustee  for  additional  contribution,  the 
syndicate  is  dissolved,  and  the  trustee,  un- 
able to  pay  any  cash,  returns  the  stock 
to  the  company. 

Simultaneously  a  second  syndicate  is 
formed  under  the  same  management.  It 
contracts  to  purchase  at  par  the  securi- 
ties held  by  the  A.  K.  Company,  in  con- 
sideration of  a  bonus  of  3-5  of  the  shares 
of  stock  surrendered  by  the  first  syndi- 
cate. Half  of  the  purchase  price  is  paid 
at  once,  the  other  half  is  payable  one 
month  later,  i.  e.,  June  30,  1911. 

Prepare  (a)  the  journal  entries  ex- 
pressing the  above  facts  on  the  books  of 
the  A.  K.  Company,  (b)  the  balance 
sheet  of  the  company  at  May  31,  1911. 


GRADED  CORPORATION  PROBLEMS 


CODE:  ORTHODOX. 

A  syndicate  formed  for  the  purpose  of 
acquiring  controlling  interests  in  several 
manufacturing  companies,  had  pooled  the 
sum  of  $1,200,000,  and  the  securities 
purchased  therewith  had  been  placed  in 
the  hands  of  a  trustee. 

A  company  was  organized  with  a  sub- 
scribed capital  of  $5,000,000  (shares  $100 
each)  of  which  $2,000  was  paid  in  cash. 

By  the  terms  of  an  agreement  entered 
into  between  the  company  and  the  trus- 
tee 49,980  shares  of  stock  were  to  be  is- 
sued to  him  for  all  the  securities  held  by 
him,  and  $624,375  in  cash  was  to  be  paid 
by  him  to  the  company,  provision  being 
made,  however,  that  in  case  the  trustee 
failed  to  pay  the  required  amount  of  cash. 


he  was  to  turn  back  to  the  company  3  1-5 
shares  of  stock  for  each  $100  that  he  fail- 
ed to  pay. 

The  trustee  being  unable  to  pay  any 
cash,  returned  stock  in  lieu  thereof,  as 
provided. 

The  company  then  offered  the  mem- 
bers of  the  syndicate  $3,000  in  securities 
at  par,  and  25  shares  of  stock  for  each 
$3,000  contributed  to  a  second  pool  of 
$1,200,000.  This  oflFer  was  accepted  and 
half  of  the  second  pool  paid  in,  securi- 
ties and  stock  being  issued  as  agreed. 

Make  entries  for  the  books  of  the  com- 
pany which  will  give  proper  expression 
to  the  foregoing  transactions.  Prepare 
a  balance  sheet. 


GRADED  CORPORATION  PROBLEMS 

CODE:  OSMOSE.  corporation  no.  i. 

The   following    statement    of    affairs  Cash $      48,ooo.oo 

1  •    1  .1  ,      .  .  Plant    450  000  00 

which  was  taken  as  being  correct,   was  Supplies   go^oooioo 

made  to  proposed  underwriters,  for  the  ^°°^  accounts  receivable.      i84,'ooo.oo    $     772,000.00 

consoHdation   of   four  corporations,   un-  Bonds  $    350,000.00 

der  a  corporation  to  be  formed  to  take  ^'p'*"'  ''°'^ -      s^o.ooo.oo    $    700,000.00 

over  all  the  four  corporations.  ^  ,  corporation  no.  3. 

It  was  understood  and  agreed  that  the  Plant  820,000.00 

stock  of   Corporation   No.    1,   par   value   of  lo^fa'ccounts  •receivable-;        270%ZoO     $   1,240,000.00 

which  was  $100.00,  should  be  purchased  

,    (tlQKnn  1-1  Capital  stock  $      850,000.00 

ar  cpioo.uu  per  snare.  Bonds 390,000.00    $  1,240,000.00 

SS°nn^'°"  ^°-  ^  '*°^^'  P^'  $100.00,  corporation  no.  3. 

at  $130.00  per  share.  Cash $      28,000.00 

Corporation  No.  3  stock,  par  $50.00,  slfppks"::::::;:;:;;;:.":::;::.::;::;:    ImoHo 

at   $50.00    per   share.  Book  accounts  receivable.         135,000.00     $      625,000.00 

Corporation  No.  4  stock,  par  $25.00,  Bonds  $    280,000.00 

at  $41  00  per  share  Capital  stock 350,000.00    $    630,000.00 

It  was  also  agreed  by  the  underwriters  .  corporation  no.  4. 

that  they  would  advance  sufficient  money  pfant i  475'ooo'oo 

to   purchase   said   stock,   the   whole   of  the  |rk"accounts-rec^i^able:        432:000.00     $  2,103,000.00 

stock  of  the  proposed  corporation  to  be  

turned  over  to  them,  together  with  $200,-  ffif  .!*!?..::;:;:::::::."::::::.'^  i.sKoToo  $  2,040.000.00 

000.00  of  the  bonds  of  the  new  company.  ; —       . 

That  sufficient  bonds  be  issued  to  re-         ^orm  the  new  corporation  with  suffi- 

tire  the  bonds  of  the   old  corporations  ^^^^^  ^^^"^^  ^"^  "^onds,  the  bonds  to  draw 

and  provide  for  $500,000.00  of  treasury  ^%  interest  to  meet  the  requirements  of 

bonds  to  be  used  in  betterments.  ^^'^  agreement,  charging  into  plant  ac- 

In  addition  to  the  above,  it  was  agreed  ^^""t  ^^^  t^^^^  and  bonus  due  the  State 

that  the  underwriters  would  purchase  at  «*  Pennsylvania  on  formation  of  corpo- 

least  $250,000.00   of  the  new  bonds   at  '"^^^o"'  estimated  at  $2,000,  together  with 

g^%  a  counsel  fee  of  $20,000,  as  well  as  other 

It  was  agreed  also  that  the  par  value  compensation  under  this  agreement,  and 

of   the    stock    of   the    new   corporation  ^^^e  a  statement  showing  the  result, 
should  be  $100.00  per  share,  and  that         -^^  ^^e  end  of  the  year  it  is  found  that 

sufficient  stock  should  be  issued  to  cover  $250,000  of  the  bonds  of  the  corporation 

20%  more  than  the  cash  outlay  of  the  have  been  sold  to  the  underwriters  and 

underwriters    for    the   purchase    of    the  "^^^  ^^^  betterments, 
stock  of  the  old  corporations.  The  results  of  the  business  for  the  first 

It  was  also  agreed  that  the  new  cor-  year  show  a  profit  of  $1,000,000  after 

poration  should  take  over  the  assets  of  charging  10%  for  depreciation  on  plant, 
the  old  corporations,  but  that  each  of  the         Declare   such   a   dividend   as   in   your 

old  corporations  should  be  clear  of  in-  judgment  is  reasonable,  crediting  surplus 

debtedness  except  for  bonds  issued.  with  whatever  balance  remains,  and  give 

The  assets  turned  over  to  the  new  cor-  a  statement  of  condition,  using  your  own 

poration  were  to  be  as  follows :  figures  in  ascertaining  profit. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OSTRACIZE. 

"A.  B."  acquires  all  the  shares  of  the 
capital  stock  of  the  Vendor  Water  Com- 
pany and  in  order  to  reorganize  it,  forms 
the  Purchaser  Water  Company  with  an 
authorized  capital  stock  of  $1,000,000, 
divided  into  $500,000  common  and  $500,- 
000  preferred  stock.  Bonds  amounting 
to  $1,000,000  are  also  authorized  by  the 
Purchaser  Company.  A  contract  is  ex- 
ecuted between  "A.  B."  individually  and 
the  Vendor  Water  Company  by  which 
the  latter,  for  a  cash  consideration,  trans- 
fers to  "A.  B."  all  its  property  subject 
to  its  existing  debts.  "A.  B."  then  sells 
the  property  acquired  from  the  Vendor 
Water  Company  to  the  Purchaser  Wa- 
ter Company  for  the  sum  of  $1,999,000 
payable  $1,000,000  in  bonds,  $500,000  in 
preferred  stock  and  $499,000  in  common 
stock  of  the  Purchaser  Water  Company. 
The  Purchaser  Company  also  agrees  to 
pay  all  existing  debts  of  the  Vendor  Com- 
pany. The  board  of  directors  of  the 
Purchaser  Company  appraise  the  acquir- 
ed plant  at  a  valuation  equal  to  the  dif- 
ference between  the  sum  paid  for  the 
total  assets  of  the  old  company  plus  lia- 
bilities assumed  and  the  value  of  the  as- 
sets acquired  exclusive  of  the  plant.  The 
Purchaser  Company  receives  in  its  treas- 
ury $1,000  cash  from  "A.  B."  for  10 
shares  of  stock  issued. 


Frame  the  opening  journal  and  cash 
book  entries  of  the  Purchaser  Water 
Company  and  prepare  the  balance  sheet 
of  the  Purchaser  Company  from  the  en- 
tries. 

The  balance  sheet  of  the  Vendor  Com- 
pany on  the  date  of  the  transfer  was  as 
follows : 

ASSETS  :' 

Plant   $  1,253.000.00 

Cash  17,000.00 

Notes  receivable  6,000.00 

Accounts  receivable 85,000.00 

Materials  in  stock  35,00000 

Unexpired  insurance  1,000.00 

Interest  paid  in  advance  on  notes 

payable    3,000.00 

Trust    company ,  deposit    to    pay 

coupons  250.00 

Stock  of  other  companies 80,000.00 

Total  assets  $  1,480,250.00 

Deficit   3,848.00 

$  1,484,098.00 

CAPITAL   STOCK   AND   LIABILITIES  : 

Capital  stock  $  1,000,000.00 

Bonds    200,000.00 

Notes  payable  150,000.00 

Accounts  payable  70,000.00 

Meter  deposits  1,848.00 

Accrued  interest  on  bonds 5,000.00 

Coupons  payable 250.00 

Reserve  for  bad  debts 7,000.00 

Reserve  for  depreciation  of  plant....  50,000.00 

$  1,484,098.00 


GRADED  CORPORATION  PROBLEMS 


CODE:  OSTRICH. 

The  Alpha  Company  is  organized  for 
the  purpose  of  acquiring  a  tract  of  land 
and  forming  an  amusement  resort.  Its 
capital  is  $50,000.  This  stock  is  prac- 
tically all  issued  in  exchange  for  deeds 
for  parts  of  said  tract  and  for  long  term 
leases  covering  the  remainder  of  tract, 
these  leases  containing,  in  all  cases, 
clauses  giving  the  Beta  Co.  or  its  as- 
signs, the  right  to  purchase  at  prices 
named  in  the  leases  and  aggregating 
$74,620.00,  on  which  six  per  cent  is  to 
be  paid  as  rental ;  taxes  to  be  paid  by 
the  Alpha  Company. 

The  Alpha  Company  made  a  deed  of 
trust  for  $150,000  on  all  its  equities  to 
secure  bonds,  and  issued  $72,000  of  such 
bonds  in  April,  1906.  It  made  a  further 
issue  of  similar  bonds  to  the  amount  of 
$54,000  in  April,  1907.  With  the  pro- 
ceeds of  such  bonds  it  improved  its  prop- 
erty and  erected  a  number  of  buildings 
at  a  cost  of  $110,000. 

In  April,  1907,  it  entered  into  an  agree- 
ment with  the  Beta  Co.  to  take  charge  of 
the  grounds,  arrange  entertainments,  etc. 
This  necessitated  further  improvements, 
which  were  to  be  paid  for  by  the  Beta 
Co. ;  this  company,  however,  had  no  mon- 
ey, so  the  Alpha  Co.  advanced  $10,000 
to  Beta  Company,  taking  therefor  the 
note  of  the  latter  company. 

The  Beta  Company  finally  failed  with 
no  assets  except  the  buildings  it  had 
erected  on  the  Alpha  Company's  land, 
and  still  owing  Alpha  Co.  for  the  said 
note,  besides  owing  many  other  creditors. 

The  Alpha  Company  now  operated  the 
amusement  park  on  its  own  account.  This 
involved  further  loss ;  and  its  balance 
sheet  on  the  30th  of  June,  1907,  showed 
as  follows : 

ASSETS  : 

Buildings  $  100,000.00 

Real  estate 20,000.00 

Note  of  Beta  Co 10,000.00 

Equities  on  leases  valued  at 100,000.00 

Loss  40,62000 

$  270,620.00 


LIABILITIES  : 

Capital  stock  $  50,000.00 

Bonds— first  issue  72,000.00 

Due  on  leases  74,620.00 

Bonds — second  issue 54,000.00 

Accounts  payable  15,000.00 

Mortgage  interest,  overdue 5,000.00 

$  270,620.00 

The  Alpha  Company  then  concluded 
negotiations  with  the  Gamma  Co.,  an 
electric  car  line  company,  whose  line  af- 
forded the  chief  means  of  access  to  the 
property  in  question.  This  company  had 
an  authorized  capital  stock  of  $50,000, 
all  being  issued. 

The  Alpha  Company  admitted  its  sol- 
vency, and  a  majority  of  its  stockholders 
agreed  to  surrender  and  cancel  their 
stock,  and  to  exchange  their  bonds  in  the 
Alpha  Company  for  stock  in  the  Gamma 
Company. 

All  the  property  of  the  Alpha  Co.  was 
to  be  transferred  to  the  Gamma  Co., 
which  was  to  assume  all  its  liabilities,  and 
was  to  increase  its  authorized  capital  to 
$150,000,  and  to  issue  bonds  on  all  its 
property  for  $100,000,  and,  out  of  the 
proceeds  of  these  bonds,  to  take  up  the 
bonds  of  the  Alpha  Co.  and  pay  off  all 
indebtedness  of  Alpha  Co.  and  to  pay 
off  its  own  indebtedness  and  develop  the 
combined  enterprises. 

The  Gamma  Company  owned  an  ex- 
clusive franchise  for  its  car  line,  which, 
owing  to  local  conditions,  was  safe  from 
competition.  This  line,  with  equipment, 
cost  $50,000.  The  yearly  net  profits  were 
$30,000,  and  were  likely  to  increase.  It 
valued  its  franchise  at  $250,000.  It  had 
the  real  estate  owned  by  the  Alpha  Com- 
pany appraised  by  six  independent  real 
estate  experts,  the  lowest  valuation  be- 
ing $600,000,  and  the  highest  $700,000. 
Gamma  Company  had  outstanding  ac- 
counts payable  amounting  to  $15,000. 

State  the  steps  required  to  legalize  the 
transfer  of  the  business  of  the  Alpha 
Company  to  the  Gamma  Company. 

Prepare  the  balance  sheet  of  Gamma 
Company  after  the  transfer  had  been 
made,  criticising  any  items  calling  for 
special  attention. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OUTCLASS. 

Business  corporation  "A"  operates  a 
manufacturing  plant  and  controls  by 
ownership  the  entire  capital  stock  of  bus- 
iness corporations  "B"  and  "C".  The 
product  marketed  by  each  is  different 
from  that  marketed  by  the  other  two, 
yet  each  utilizes  some  of  the  product  of 
the  others  and  regularly  receives  and  pays 
the  invoices  therefor.  "A"  who  owns 
the  land  on  which  the  three  plants  are 
situated,  charges  rent  to  the  other  two 
companies  and  furnishes  and  charges 
them  with  power,  heat  and  light.  On  ac- 
count of  insufficiency  of  capital,  "B"  and 
"C"  are  constant  borrowers  from  "A" 
and  pay  interest  on  such  loans.  The 
profit  or  loss  of  "B"  and  "C"  is  taken 
over  by  "A"  at  the  end  of  each  year,  the 


fiscal  periods  of  the  three  being  the  same. 
It  is  desired  that  the  accounts  shall 
be  kept  so  that  the  three  trial  balances 
before  closing  will  permit  of  making, 
without  analysis  of  any  accounts,  a  con- 
solidated statement  of  operations  and  a 
consolidated  balance  sheet  for  the  annual 
report  of  corporation  "A",  in  addition  to 
the  separate  statements  of  each,  that  will 
exclude  all  accounts  growing  out  of  the 
inter-relations  of  the  three  companies  and 
will  make  the  same  representation  in  the 
classified  accounts  as  though  the  prop- 
erties were  owned  directly  by  Company 
"A"  and  all  of  the  affaris  and  operations 
conducted  by  Company  "A".  State  gen- 
erally how  such  conditions  may  be 
brought  about  in  the  three  trial  balances. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OUTFIT. 

In  making  up  a  consolidated  balance 
sheet  of  a  holding  or  parent  company 
and  two  subsidiary  companies  where,  in 
the  case  of  one  of  the  subsidiary  com- 
panies its  entire  capital  stock  has  been  ac- 
quired at  less  than  par,  and  in  the  case 
of  the  other,  at  a  substantial  premium, 
how  would  you  deal  with  such  discount 
and  premium,  respectively,  in  the  consoli- 


dated balance  sheet? 

In  the  event  that  all  the  stock  of  one 
of  the  subsidiary  companies  was  not 
owned  by  the  parent  company,  how 
should  such  proportion  of  said  stock  be- 
longing to  the  minority  stockholders,  to- 
gether with  the  proportion  of  surplus  ap- 
pertaining thereto,  be  stated  in  the  bal- 
ance sheet? 


GRADED  CORPORATION  PROBLEMS 


CODE:  OUTFLOW. 

A  parent  company  holding  notes   re-  creating  a  contingent  liability  thereunder, 

ceivable  from  a  subsidiary  company  to  In  preparing  a  consolidated  balance  sheet 

the  extent  of  $100,000.00  endorses  and  of   the   two   companies,    state   how   and 

discounts  said  notes  with  its  bankers,  thus  where  the  liability  would  appear. 


GRADED  CORPORATION  PROBLEMS 

CODE:  OUTMAN.  Between  July  1  and  July  31,  1910,  the 
Company  C  was  incorporated  in  May,  following  transactions  occurred :  Organ- 
1910,  to  acquire  the  stock  of  Companies  ization  expenses  paid  in  cash  by  Com- 
A  and  B.  Company  C's  capital  stock  is  pany  C  $5,000;  intercompany  advances 
divided  into  preferred  $2,500,000,  com-  by  C :  to  A  $60,000,  to  B  $60,000 ;  Com- 
mon $1,500,000;  all  the  stock  is  out-  pany  A  reduced  its  accounts  payable  by 
standing  and  fully  paid ;  it  has  been  is-  $25,000 ;  its  loans  payable  by  $30,000  and 
sued  (a)  for  stock  to  the  stockholders  its  audited  vouchers  by  $15,000;  Com- 
of  Companies  A  and  B,  (b)  $20,000  of  pany  B  reduced  its  accounts  payable  by 
preferred  for  organization  expenses,  (c)  $29,500,  liquidated  its  audited  vouchers 
for  cash.  The  stockholders  of  A  and  B  unpaid  and  its  interest  due  under  the 
received  preferred  stock  for  the  intrinsic,  bonds. 

undepreciated  book  value  of  the  assets,  The  manufacturing  operations  of  the 

as  reflected     by  the     following     balance  period  show :     Company  A — labor  $10,- 

sheets    of   their   companies   at   June    30,  000 ;  overhead  expense  $8,000 ;  materials 

1910,  and  $300,000  of  common  stock  di-  consumed  $9,886 ;  inventory  of  goods  in 

visible  equally  to  Companies  A  and  B :  process  $46,300,  of  finished  goods  $50,- 

"a"             "b"  'i'40;   selling  expenses   paid  $1,600;   ad- 

?^nkr!s'tde;,;^enCZZ::^    sBoo    ^    sSooo  ministration  expenses  $2,500;  sales  $72,- 

Machinery  and  tools 228,600             376,800  500  ;  CollcctioUS  of  OpCU  aCCOUUtS  $86,400. 

Transportation    equipment 21,000               17,000  r-                       t)        i    u         cno  ^rvo                 i          i  rs^ 

Investment  in  land 150,000  Company  B — labor  $3,600  ;  overhead  $2,- 

Investment  in  bonds— Co.  "B"           60,000  "^KO  •        mafprialc      <i;^9in-        imr^^^fr-vrir     rsf 

Investment  in  stocks 200,000  '^^" '      materials    ^o,^iU ,      invcutory   ot 

Goods  in  process 45,000          49,341  goods    in    proccss    $40,500,     of   finished 

Finished   goods  69,000  76,340        Z 1^    c^/^^ooA  1  Ona  i\r\r\  n       ^• 

Materials  and  supplies 58,000               51,300  gOOdS    $46,380  ;    SalCS    $98,000  ;    COllcctlOn 

Suntrreceivai;ie:=:=^        llfol          llHI  ^^  ^P^"  ^ccounts  $109,150;  admiuistra- 

Demand  notes— Co.  "B" 5,000  tion  expeuscs  $3,000.75  ;  Selling  expenses 

Accrued  interest  1,800  O'-i   riAf)                                                               ' 

$  1,100,820    $  1,245,756  No   materials   were   purchased   during 

^.             77^,  the  period  and  the  current  expenses  were 

Capital  stock  outstanding—  paid  as  soou  as  the  iuvoiccs  were  audit- 

Common  $       700,000     $  1,000,000  j         /-                         a       i       i           i           ,•     •  i         ,        . 

Preferred  100,000  cd.     Lompauy  A  declared  a  dividend  of 

'^?e?e°sf acclu'ed  l.^l^^..'"^   92,700  $100,000  and  Compauy  B  a  dividend  of 

Accounts    payable 59,800               41^656  $25,000. 

Loans  payable  65,800               35,000  o                    ,i                      i-  i    ^    j    u    i                  i        - 

Audited  vouchers  unpaid 18,320           is^oo  Prepare  the  consolidated  balance  sheet 

Demand  notes  payable 5,000  of  Cnmnanips  A  and  B  and  C    at  Tnlv  ^1 

Reserve  for  depreciation 24,900               30,000  "     ^-OmpdniCS  /\  dUQ  U  aUQ   L.,  df  JUly  rfi, 

Reserve  for  doubtful  accounts.         5,000            2,000  1910,  to  bc  Submitted  to  the  dircctors  of 

Reserve    for    contingencies 16,000  r^                        r^          j                                 i            .          i 

Surplus  111,000          26,000  Company  C  and  so  arranged  as  to  show 

$"T:i";^2-^   VTJ^^,  them  the  exact  detail  of  the  properties 

—  that  they  control. 


GRADED  CORPORATION  PROBLEMS 


CODE:  OUTSKIRT. 

From  the  three  following  trial  balances 
prepare  a  consolidated  balance  sheet  as 
at  December  31,  1913,  in  the  form  you 
would  draw  it  up  for  presentation  to  the 
stockholders  of  the  parent  company  (The 
Safety  Razor  Company)  showing  as  sep- 
arate items  therein  (a)  the  total  goodwill 
of  the  combined  companies;  and  (b)  the 
net  profits  accruing  to  the  new  corpora- 
tion, viz.,  to  the  Safety  Razor  Company. 

SAFETY   RAZOR   COMPANY 

TRIAL  BALANCE  AT  DECEMBER  31,  1912: 

Preferred  stock $  $  1,500,000.00 


Common   stock 

Investments  in  Subsidiary 
Companies — 
4,000  shares  of  stock  of 
L.  W.  Co.  and  4,000 
shares  of  stock  of 
Steel  Blade  Co.,  both 
of    $100.00    each    at 

cost     2,500,000.00 

Accounts   payable 

Dividends     of     subsidiary 

companies    

Administration    expenses..  25,000.00 
L.     W.     Co.    current    ac- 
count             100,000.00 

Steel  Blade  Company  ad- 
vances             150,000.00 

Cash    270,000.00 

Organization    expenses 75,000.00 


1,500,000.00 


20,000.00 
100,000.00 


L.   W.   COMPANY 

TRIAL  BALANCE  AT  DECEMBER  31,  1912: 


Properties   and  plant $ 

Goodwill    

Investment  in  Steel  Blade 
Co.— 

2,000  shares  of  a  par 
value  of  $100.00  each 
cost    $300,000.00 

Inventories   

Receivables  

Cash  

Capital  stock  (4,000 
shares)     

Accounts  payable 

Steel  Blade  Company 

Surplus  (includes  $100,- 
000.00  added  to  book 
value  of  investment  in 
Steel  Blade  Co.)  

Safety   Razor   Co 


Dr. 
325,000.00 
250,000.00 


400,000.00 

250,000.00 

195,000.00 

90,000.00 


Cr. 


400,000.00 
125,000.00 
175,000.00 


710,000.00 
100,000.00 


$  1,510,000.00     $  1,510,000.00 


STEEL   BLADE   COMPANY 

TRIAL  BALANCE  AT  DECEMBER  31,  1912: 


Goodwill    $ 

Property  and   plant 

Inventories   

Receivables,    general 

L.   W.   Company 

Cash  

Capital     stock     (6,000 

shares  

Accounts    payable 

Safety  Razor  Company.... 
Surplus   or  deficit 


Dr. 

50,000.00 
325,000.00 
190,000.00 
105,000.00 
195,000.00 

10,000.00 


Cr. 


600,000.00 
90,000.00 

150,000.00 
35,000.00 


$  3,120,000.00  $  3,120,000.00 


$   875,000.00  $   875,000.00 


In  the  preparation  of  your  consolidated 
balance  sheet  be  guided  by  the  following 
assumed  facts : 

1.  That  the  Safety  Razor  Co.  was 
formed  on  March  28,  1912,  and  acquired 
its  stock  ownership  in  the  two  subsidiary 
companies,  as  shown  in  its  trial  balance, 
on  April  1,  1912. 

2.  That  at  January  1,  1912,  the  L.  W. 
Company  had  a  surplus  of  $605,000.00 
and  the  Steel  Blade  Company  a  deficit  of 
$50,000.00. 

3.  That  no  inventory  was  taken  of 
either  the  L.  W.  Company  or  the  Steel 
Blade  between  January  1  and  December 
31,  1912,  the  business  of  the  companies 
being  continued  without  interruption  not- 
withstanding the  change  in  ownership  of 
the  capital  stock  as  indicated  above. 

4.  That  prior  to  December  31,  1912, 
the  L.  W.  Company  declared  a  dividend 
of  $100,000.00  payable  to  the  parent  com- 
pany which  was  duly  taken  up  on  the 


books  of  both  companies,  being  passed 
through  the  Current  Accounts  and 
charged  against  the  surplus  of  the  L.  W. 
Company  prior  to  December  31,  1912. 

5.  That  the  difference  in  the  current 
accounts  between  the  Steel  Blade  Com- 
pany and  the  L.  W.  Company  represents 
as  to  $10,000.00  merchandise  in  transit, 
and  as  to  the  remaining  $10,000.00  a 
charge  for  rental  of  warehouse  for  the 
last  six  months  of  1912,  which  has  been 
credited  to  the  rent  account  on  the  books 
of  the  Steel  Blade  Company. 

6.  That  it  is  estimated  on  reliable  au- 
thority which  may  be  accepted  as  final 
that  from  January  1  to  March  31,  1912, 
the  net  profits  of  the  L.  W.  Company 
amounted  to  $30,000.00  while  during  the 
same  period  the  Steel  Blade  Company 
lost  $15,000.00. 

Attach  your  consolidating  working  pa- 
pers to  the  consolidated  balance  sheet  you 
prepare. 


Cay  lord  Bros. 

Makers 

S^'racuse,  N.  V. 

PAT.  JAN.  21,  1908 


Ir 


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